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

Uses and habit forming commodity -price elasticity of demand, Uses and Habi...

Uses and Habit Forming Commodity -price elasticity of demand: The number of possible uses : A commodity has high price elasticity of demand (or elastic demand) if it can be p

Firms in a competitive markets, illustrate a long-run equilbrium using diag...

illustrate a long-run equilbrium using diagrams for the gold market and for a representative gold mine

Moving average methods, Moving Average Methods: Under this methods the movi...

Moving Average Methods: Under this methods the moving average to the sales of the past years is computed. The computed moving average is taken as forecast for the next year or peri

Division of labor, Division of Labor The occupation or breaking down o...

Division of Labor The occupation or breaking down of jobs into simple and repetitive responsibilities.

Economics, Ask questiowhat are the importance of the branches of economics

Ask questiowhat are the importance of the branches of economics

Nucleic acid functions, Nucleic acids perform two important functions 1...

Nucleic acids perform two important functions 1. Replication:  It is the property of biomolecules to synthesise exact copy of it. DNA has this unique property of duplicating it

Determine the profit maximizing price and quantity, Determine the profit ma...

Determine the profit maximizing price and quantity A firm has segmented its market into the following demand functions: P1 = 500 – 50Q     P2 = 500 – 20Q     with a cost fu

Common property regime , Normal 0 false false false EN-...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Insurance - reducing risk, Insurance - Risk averse are willing to pay t...

Insurance - Risk averse are willing to pay to keep away from risk. - If cost of insurance equals expected loss, risk averse people will buy sufficient insurance to totally r

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