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

Income increases at an average annual rate, Upon taking his first job at co...

Upon taking his first job at college your Dad earns an annual salary of $38,000 and set a goal to earn $10000 per year. If his salary increases at an average annual rate of 12% how

Damaging to the economy, Why do financial crises occur and why are they so ...

Why do financial crises occur and why are they so damaging to the economy?

Price of gasoline has recently come down, The price of gasoline has recentl...

The price of gasoline has recently come down as has the quantity. Show graphically and explain what might have caused this.

Willing to hold money, Was money a better store of value in the United Stat...

Was money a better store of value in the United States in the 1950s than it was in the 1970s? Why or why not? In which period would you have been willing to hold money? Which one w

Determine aggregate supply curve is vertical or not, Explain whether the fo...

Explain whether the following statements are true or false: a) The long run aggregate supply curve is vertical because economic forces do not affect long run aggregate supply.

Microsoft stock buy call options, Suppose you buy call options on Microsoft...

Suppose you buy call options on Microsoft stock. Each option costs $2 and has the strike price of $40 and the expiration date July 1. Discuss whether you would exercise the options

Illustrate the statement -currency inside banks is not money, Illustrate th...

Illustrate the statement - Currency inside banks is not money The fact that currency inside commercial banks is not money may strike you as odd, but it is an important principl

Real wage, what wil hapen to the real wage if the nominal wages and prices ...

what wil hapen to the real wage if the nominal wages and prices rise at the same rate per year?

Interdependence of macroeconomics and microeconomics , INTERDEPENDENCE OF M...

INTERDEPENDENCE OF MACROECONOMICS AND MICROECONOMICS In microeconomics, the underlying assumption is that the total output, total employment and total spending are given. It th

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