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

Define the circular flow diagram, The circular flow diagram is used to repr...

The circular flow diagram is used to represent the interdependence that exists between sectors of the economy.  The diagram illustrates that there are various collections of same e

Explain total fixed and variable costs, Fixed costs are those which are ind...

Fixed costs are those which are independent of output that is they do not change with changes in output. These costs are a fixed amount which must be incurred by a firm in the shor

Define solvency margin, In relation to solvency margins in the insurance in...

In relation to solvency margins in the insurance industry, the solvency margin is the amount of regulatory capital an insurance undertaking is obliged to hold against unforeseen ev

International trade, International trade: International trade refers t...

International trade: International trade refers to the exchange of goods and services between countries. Goods sold to other countries are referred to as exports and goods bou

Theory of inter-temporal consumption, THEORY OF INTER-TEMPORAL CONSUMPTION:...

THEORY OF INTER-TEMPORAL CONSUMPTION: In the previous two units, we have been concerned with choices among contemporaneous commodities. An important class of choices made by c

The cost of production, crumble corporation produce biscuits. here the rela...

crumble corporation produce biscuits. here the relation between the number of workers and output

Explain the concept of budget multiplier, Problem 1: a. Use the circula...

Problem 1: a. Use the circular flow model to explain the concepts of injections and withdrawals. b. Explain the concept of budget multiplier. c. Using the concept of mult

#title.micro, what are jobs of the department of justice and the federal tr...

what are jobs of the department of justice and the federal trade commission in business pratices.

Comparison with other countries, Comparison with Other Countries: The ...

Comparison with Other Countries: The basic purpose of this type of comparison is that: (i) it helps us to know the potentials of growth that can be built up in an economy,

Marginal utility theory, discuss whether marginal utility is a realistic pi...

discuss whether marginal utility is a realistic piece of economy analysis in a consumer demand

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