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

Marginal approach to profit maximization, The marginal approach to profit m...

The marginal approach to profit maximization means that a firm should produce until a. marginal revenue equals zero b. marginal revenue equals marginal costs c. marginal cost becom

Define the monopoly of central banks, Define the monopoly of Central banks ...

Define the monopoly of Central banks The central bank has a monopoly on issuing currency, it is in complete control of the monetary base. In section 7.4.2 we will describe exac

State the both -cyclical and classical unemployment, State the both -Cyclic...

State the both -Cyclical and Classical unemployment Cyclical unemployment Unemployment because of a recession. Classical unemployment Unemployment because of

SARB, #If the reserve bank wants to pursue a contractionary monetary policy...

#If the reserve bank wants to pursue a contractionary monetary policy, the bank should?

Implication of corruption, what are the implications of corruption in econo...

what are the implications of corruption in economy and fiscal policy

Find real interest rate and nominal interest rate, #questionAssume that an ...

#questionAssume that an economy''s GDP Y=5000. Also assume that the government runs a deficit where tax revenue T=1000 and government expendituresG= 1500. The consumption function

What is probability the time between two successive calls, A one-car taxi c...

A one-car taxi company receives an average of 18 calls per day. The receptionist takes down details of the requested journey and relays them to the driver by radio. Each passenger'

How internal resources important, Why is it important to study the internal...

Why is it important to study the internal resources, capabilities, and activities of firms? What insights can be gained?

Components of balance of payments, Components of Balance of Payments   T...

Components of Balance of Payments   The BoP statement is usually divided into three major groups of accounts. These are: i.The Current Account: This account records the imp

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