Determine the optimal order size, Microeconomics

Assignment Help:

A major component of the costs of many large firms is the cost associated with ordering and holding inventory. If the yearly demand for the good is D and the size of each order placed is  q  then the number of orders  N  in each year is:

N=D/Q

If the cost of placing each order is Co then the cost of placing all N orders is:

OC = CoN

The second component is the carrying or handling cost of an inventory. Under the assumption that the average number of items in stock is q / 2  and with cost of each item set at  p , the value of this average number of items is p (q / 2) . The carrying in this situation is the proportion C of this value:

CC = Cnp (q/2)

The third component of total costs is simply the purchase cost of all the items, or PC = pD.  Assuming that Co, D, Cn and p are constant, what is the optimal order size q?


Related Discussions:- Determine the optimal order size

Production Possibility Curve, How does production possibility curve help so...

How does production possibility curve help solve central problems?

Wage labour, Wage Labour: A form of work in that employees perform labour f...

Wage Labour: A form of work in that employees perform labour for others, under their direction, in return for salaries orwages. Employer controls and owns the product of the labour

Mrs, what is mrs

what is mrs

Explain labour intensity, Q. Explain Labour Intensity? Labour Intensity...

Q. Explain Labour Intensity? Labour Intensity: Ratio of labour effort expended, compared to total on-the-job compensated labour time. A higher ratio of labour intensity reflect

Time value of money, My current car gets 10 miles to the gallon and no resa...

My current car gets 10 miles to the gallon and no resale value, but it will last 5 years for sure. I can always buy a new car for 8000 dollars that gets 20 miles to the gallon. A g

Explain the term returns to scale, An increase in the scale means that all ...

An increase in the scale means that all inputs or factors are increased in a given proportion. Increase in the scale thus occurs when all factors or inputs are increased keeping fa

Theory, who propounded the pure international theory of trade?

who propounded the pure international theory of trade?

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd