Question: Johnson Electronics (JE) sells electrical and electronic components through catalogs. Catalogs are updated and printed twice every year. Each printing run incurs a fixed cost

Johnson Electronics (JE) sells electrical and electronic components through catalogs. Catalogs are updated and printed twice every year. Each printing run incurs a fixed cost of $5,000, which involves catalog design cost and printing setup cost. The variable production cost is $5 per catalog. Annual demand for catalogs is estimated to be normally distributed with a mean of 16,000 and standard deviation of 4,000. Data indicate that, on average, each customer ordering a catalog generates a profit of $35 from sales.

Suppose that each unsold catalog can be sold to a recycling company for a price of $1. What is the optimal ordering quantity?

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