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

How is economics work with interaction of individual choices, How is econom...

How is economics works with interaction of individual choices? Principles behind the interaction of individual choices: 1. There are gains through trade. • Specialization

Explain the determinants of transaction demand, Macro Economics 1. How...

Macro Economics 1. How was the Classical Theory of interest role criticized by Keynes? 2. Illustrate the barter system that was used in early times in lieu of money. 3.

Functions of commercial bank - buying government securities, Buying ...

Buying government securities: When a commercial bank buys government bonds, the effect is substantially the same as that of lending - new money is created. To

Find out the expected return on capital, Butthole Industries is buying out ...

Butthole Industries is buying out Avengers, Inc.  Butthole and Avengers both have market capitalizations equal to their fair value or the present value of their net cash flows.  Bu

Equilibrium in money markit, equilibrium in money market and derivation of ...

equilibrium in money market and derivation of lm curve

Total firm''s cost schedules to calculate, Use the following data on a firm...

Use the following data on a firm's total cost schedules to calculate its average variable cost, average fixed cost, average total cost, and marginal cost schedules. Output Total

Money and Banking, What is the relationship between deposit multipier,Credi...

What is the relationship between deposit multipier,Credit Multiplier and Deposit multiplier?

What is the marginal product, What is the marginal product? The margina...

What is the marginal product? The marginal product of an input is the extra quantity of output which is generated by using one more unit of which input. Marginal product of

Economists finance manager functional areas of MANAGEMENT, The primary func...

The primary functions of economists are to teach, contribute research and empirical findings and formulate policies. Most of the professional economists are associated with academi

Inflation, if govtment face cost push inflation which policy govtment shoul...

if govtment face cost push inflation which policy govtment should take to control inflatoin?

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