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

Changes in money market equilibrium, Changes in Money Market Equilibrium ...

Changes in Money Market Equilibrium A shift in either the supply curve for money or the demand curve for money will alter the equilibrium position in the money market (and the

Give detail explanation about the inflation, Give detail explanation about ...

Give detail explanation about the Inflation Price index is computed at a particular point in time, inflation over a time period, mainly one year Inflation may just as

Real Gdp, What do I calculate with quantity of each good produced, to find ...

What do I calculate with quantity of each good produced, to find the Real GDP?

According to bowen leamer and sveikauskas, According to Bowen, Leamer, and ...

According to Bowen, Leamer, and Sveikauskas, which of the following is true? a. A nation indirectly exports its most abundant factors of production. b. A nation indirectly im

Effect of a tax on ice cream, Show the market for cigarettes paying particu...

Show the market for cigarettes paying particular attention to the price elasticity of demand and supply. What would happen to the total expenditure on cigarettes if there was a tax

What are the important tools to consider monetary policy, What are the impo...

What are the important tools to consider Monetary Policy? Important tools to consider Monetary Policy: a. What the money demand curve is b. Why the liquidity preference m

Demand for the hotel''s rooms, Suppose that a particular large hotel has 79...

Suppose that a particular large hotel has 790 rooms. Furthermore, suppose that the demand for the hotel's rooms are normally distributed with a mean demand of 733 rooms with a stan

Explain why quantitative measures, Suppose a company is considering two inv...

Suppose a company is considering two investment projects. Both projects require an upfront expenditure of $30 million. The company estimates that the cost of capital is 10% and tha

Money market with inflation and rising money supply, Q. Money market with i...

Q. Money market with inflation and rising money supply? Figure: The money market with inflation and rising money supply If we let π M refer the growth rate in money

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