Optimal Order Quantity Assignment
A business sells components through catalogs. Catalogs are printed once every two years. Units leftover from a previous run are discarded. Each printing run incurs a fixed cost of $25,000, with a variable production cost of $5 per catalog. The annual demand for catalogs is estimated to be normally distributed with a mean of 16,000 and a standard deviation of 4,000. Data indicates that, on average, each customer ordering a catalog generates a profit of $35 from sales. The company wants only printing run in each 2-year cycle. I ) What model should be used in this case?
V) What is the marginal benefit of each Catalog ($)? ; VI) What is the marginal cost of each Catalog ($)? ; VII) What is the optimal service Level for the Company (%)?
VIII) What Z corresponds to the Optimal Service Level? ; IX) What is the optimal order quantity for the Stocking period (units)? .