Question: These problems use the swimsuit example to do a bit more exploring of the ideas of MTO contracts. Assume that the manufacturer is selling swimsuits

These problems use the swimsuit example to do a bit more exploring of the ideas of MTO contracts. Assume that the manufacturer is selling swimsuits to a distributor and that the following data is correct.

These problems use the swimsuit example to do a

a.) What is the globally optimal profit?

b.) If a buy-back contract is used and the manufacturer sells the product to the distributor for $65, what is the buy-back amount that is required for the supply chain profit to equal the globally optimal profit?

Distributor's selling price $100/swimsuit Salvage value $20/swimsuit Fixed production cost (paid by retailer to mfg) $130K Variable production cost $35/swimsuit

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