*The J&B Card Shop sells calendars featuring a different colonial picture for each month. The once-a-year order for each year’s calendar arrives in September. From past experience, the September-to-July demand for the calendars can be approximated by a normal distribution with μ=300μ=300 and standard deviation=20standard deviation=20 . The calendars cost $6.50 each, and J&B sells them for $15 each.
Suppose that J&B throws out all unsold calendars at the end of July. Using marginal economic analysis, how many calendars should be ordered?
If J&B sells surplus calendars for $1 at the end of July and can sell all of them at this price, how many calendars should be ordered?
Cs = Cost of shortage = selling price - cost = 15-6.5 = 8.5
Co = Cost of overage = cost - salvage value = 6.5-0 =6.5
Critical ratio = Cs/ Co+Cs = 8.5 /8.5+6.5 =8.5 /15 = 0.566
The corresponding z value = 0.17
Optimum value of order = mu + SD xz
=300+20x0.17 =303.4 =303
If the salvage value becomes 1, then the Co will be 6.5-1 =5.5
critical ratio will become = 8.5 / 8.5+5.5 = 8.5/14 =0.6071
which corresponds to a z value of 0.27
New value of optimum order = 300+20x0.27 = 305.4 =305
*The J&B Card Shop sells calendars featuring a different colonial picture for each month. The once-a-year...