Consider a music store that sells compact discs. The supplier manufactures compact discs for $1 per unit and sells them to the music store for $5 per unit. The retailer sells each record to the end consumer for $10. At this retail price, market demand has a normal distribution, with an average of 1000 and a standard deviation of 300. Discs left over at the end of the sale period have no value. How many discs should an independent retailer order? What are the supply chain gains with an independent retailer? If the manufacturer and retailer are vertically integrated (they are one company), how many disks should the retailer order? What are the supply chain gains when the manufacturer and retailer are one company? Please explain step by step

Answer rating: 100% (QA)

To determine the optimal order quantity we need to calculate the expected profit for each order quantity and choose the one that maximizes the profit ... View the full answer