What is mavericks optimal order quantity

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Reference no: EM133335295

Assignment:

Suppose that Dr. Su really wants to get out of academia for more money but driving for Uber/Lyft may not be the best option. He decides to start a new wholesale business and now sells high-end specialized electronics to a retailer called Maverick Corp. Maverick purchases each unit from Dr. Su for $75 and retails them for $130. Dr. Su's sourcing cost from a mysterious supplier {best friend back in grad school] is $35. At the end of the season, Maverick estimates the salvage value is only about $25 for each unit. Maverick believes this season's demand can be represented by a normal distribution with a mean of 300 and a standard deviation of 100. The following is the supply chain: Mysterious supplier--'Dr. Su Wholesale- Maverick Corp. Retail -- customers

(a) What is Maverick's optimal order quantity?

(b) What is Dr. Su's pro?t when Maverick orders at optimal quantity?

(d) Maverick discover a new after-season market that they can sell at a higher price of ($50) but need to spend an extra $5 per unit of shipping costs and $5 per unit for holding. What quantity should Maverick order? ---assume that Maverick does not have the new market option in (d) for the following questions

(e) Consider Dr. Su's store and Maverick retail store as a single entity (vertical integration). what is the optimal order quantity for the single entity?

(f) If Dr. Su wants to encourage Maverick to order close to or more than the amount in (e) using a buyback contract. will a buyback price = $50 work?

(g) Dr. Su decides to use a revenue-sharing contract and lower the price from $75 to $30 but asks Maverick to share a fraction of its revenue. They both agree on the revenue share fraction of 50% (f = 0.5). With the revenue-sharing clause. how many should Marverick order?

Reference no: EM133335295

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