Optimal order size, Macroeconomics

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 C0 then the cost of placing all N  orders is: 

OC =  C0N

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 Cn of this value:

27_optimal order.png

The third component of total costs is simply the purchase cost of all the items, or . PC = pD =  Assuming that C0, D, Cn and p are constant, what is the optimal order size q?


Related Discussions:- Optimal order size

What are the capitalist countries in the world, Capitalism is the dominant,...

Capitalism is the dominant, most used form of government there is in the globe today. Presently, over 80% of countries use capitalism and a free market economy.

Elasticity, Suppose price elasticity of demand for HP laptops is -2.3. If t...

Suppose price elasticity of demand for HP laptops is -2.3. If the price of an HP laptop is $1,000, what should the new price be to have an increase of 10% in quantity demanded for

Unions, Are unions “harmful monopolies” or "necessary?" compare and contras...

Are unions “harmful monopolies” or "necessary?" compare and contrast the schools of thought that subscribe and their point of views?

Medium run adjustment - economy adjustment, Suppose the economy is currentl...

Suppose the economy is currently in recession, and the exchange rate if fixed using the IS-LM model. a) Explain and illustrate the economy adjustment (in the medium run) b) E

How large is the money supply, Assume that the following data describe the ...

Assume that the following data describe the condition of the banking system: Total Reserves                         $200 billion Transactions Deposited          $700 billion

Determination of national income, Explain determination of national income ...

Explain determination of national income using aggregate demand-aggregate supply and saving-investment methods for a three sector economy.

Explain about the diminishing returns to an input, Explain about the dimini...

Explain about the diminishing returns to an input. There are diminishing returns to an input while an increase within the quantity of which input, holding the levels of each of

Alternaria toxins, Several species of Alternaria (A. citri, A. alternata, ...

Several species of Alternaria (A. citri, A. alternata, A. solani and A. tenuissima) produce toxic substances that have been found in apples, tomatoes, blueberries and others. The

Economists who believe that monetary policy, Those economists who believe t...

Those economists who believe that monetary policy is more potent than fiscal policy argue that the: A) Responsiveness of money demand to the interest rate is large. B) Responsive

Neo-Keynesian Synthesis, how would you describe a neo-keynesian (or neoclas...

how would you describe a neo-keynesian (or neoclassical) synthesis? and why did Joan Robinson label it "bastard Keynesian"

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