Sam s Bookstore Objective Determine the quantity of books by lizbethbennett

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									Sam’s Bookstore Objective Determine the quantity of books to order to maximize expected profit. Variables Input: • Unit cost • Unit price • Sale price for leftovers • Demand quantity Decision: • Order quantity Output: • • • • •

Units sold at regular price Units sold at sale price Total revenue Total cost Profit

Model - see Excel Spreadsheet Analysis Figure 1 below shows how the expected profit varies with the quantity ordered. Order Quantity 500 1000 1500 2000 2500 3000 3500 4000 4500 Expected Profit $3,000 $6,750 $9,500 $12,250 $11,375 $9,500 $4,875 $1,350 $(4,150)

$14,000 $12,000 $10,000 Expected Profit $8,000 $6,000 $4,000 $2,000 $0 -$2,000 0 -$4,000 -$6,000 Quantity Ordered
Figure 1: Expected profit vs. Quantity ordered

1000

2000

3000

4000

5000

Recommendations Figure 1 shows that the maximum expected profit is reached when 2000 books are ordered. It is therefore recommended that Sam orders 2000 copies of the book.


								
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