Sam’s Bookstore, with many locations across the United States, places orders for all of the latest books and then distributes them to its individual bookstores. Sam’s needs a model to help it order the appropriate number of any title. For example, Sam’s plans to order a popular new hardback novel, which it will sell for $30. It can purchase any number of this book from the publisher, but due to quantity discounts, the unit cost for all books it orders depends on the number ordered. Specifically, if the number ordered is less than 1000, the unit cost is $24. After each 1000, the unit cost drops: to $23 for at least 1000 copies; to $22.25 for at least 2000; to $21.75 for at least 3000; and to $21.30 (the lowest possible unit cost) for at least 4000. For example, if Sam’s orders 2500 books, its total cost is $22.25(2500) = $55,625. Sam’s is very uncertain about the demand for this book—it estimates that demand could be anywhere from 500 to 4500. Also, as with most hardback novels, this one will eventually come out in paperback. Therefore, if Sam’s has any hardbacks left when the paperback comes out, it will put them on sale for $10, at which price it believes all leftovers will be sold. How many copies of this hardback novel should Sam’s order from the publisher? The spreadsheet model for Sam’s Bookstore contains a two-way data table for profit versus order quantity and demand. Experiment with Excel’s chart types to create a chart that shows this information graphically in an intuitive format. (Choose the format you would choose to give a presentation to your boss.)

BuyFind

Practical Management Science

6th Edition
WINSTON + 1 other
Publisher: Cengage,
ISBN: 9781337406659
BuyFind

Practical Management Science

6th Edition
WINSTON + 1 other
Publisher: Cengage,
ISBN: 9781337406659

Solutions

Chapter
Section
Chapter 2.5, Problem 6P
Textbook Problem

Sam’s Bookstore, with many locations across the United States, places orders for all of the latest books and then distributes them to its individual bookstores. Sam’s needs a model to help it order the appropriate number of any title. For example, Sam’s plans to order a popular new hardback novel, which it will sell for $30. It can purchase any number of this book from the publisher, but due to quantity discounts, the unit cost for all books it orders depends on the number ordered. Specifically, if the number ordered is less than 1000, the unit cost is $24. After each 1000, the unit cost drops: to $23 for at least 1000 copies; to $22.25 for at least 2000; to $21.75 for at least 3000; and to $21.30 (the lowest possible unit cost) for at least 4000. For example, if Sam’s orders 2500 books, its total cost is $22.25(2500) = $55,625. Sam’s is very uncertain about the demand for this book—it estimates that demand could be anywhere from 500 to 4500. Also, as with most hardback novels, this one will eventually come out in paperback. Therefore, if Sam’s has any hardbacks left when the paperback comes out, it will put them on sale for $10, at which price it believes all leftovers will be sold. How many copies of this hardback novel should Sam’s order from the publisher?

The spreadsheet model for Sam’s Bookstore contains a two-way data table for profit versus order quantity and demand. Experiment with Excel’s chart types to create a chart that shows this information graphically in an intuitive format. (Choose the format you would choose to give a presentation to your boss.)

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Chapter 2 Solutions

Practical Management Science
Ch. 2.6 - The Links Company sells its golf clubs at golf...Ch. 2.6 - The Links Company sells its golf clubs at golf...Ch. 2.6 - The Links Company sells its golf clubs at golf...Ch. 2.7 - Acron is a large drug company. At the current...Ch. 2.7 - Acron is a large drug company. At the current...Ch. 2.7 - Acron is a large drug company. At the current...Ch. 2.7 - Acron is a large drug company. At the current...Ch. 2.7 - Acron is a large drug company. At the current...Ch. 2.7 - Acron is a large drug company. At the current...Ch. 2 - Julie James is opening a lemonade stand. She...Ch. 2 - You are thinking of opening a Broadway play, I...Ch. 2 - You are thinking of opening a small copy shop. It...Ch. 2 - Georgia McBeal is trying to save for her...Ch. 2 - A European call option on a stock earns the owner...Ch. 2 - Repeat parts a-d of the previous problem for a...Ch. 2 - The file P02_26.xlsx lists sales (in millions of...Ch. 2 - Dataware is trying to determine whether to give a...Ch. 2 - The file P02_28.xlsx gives the annual sales for...Ch. 2 - Assume that the number of units sold of a product...Ch. 2 - A company manufacturers a product in the United...Ch. 2 - The yield of a chemical reaction is defined as the...Ch. 2 - A bond is currently selling for 1040. It pays the...Ch. 2 - Assume the demand for a companys drug Wozac during...Ch. 2 - Consider a project with the following cash flows:...Ch. 2 - A software company is considering translating its...Ch. 2 - The payback of a project is the number of years it...Ch. 2 - You are entering the widget business. It costs...Ch. 2 - Suppose you are borrowing 25,000 and making...Ch. 2 - You are thinking of starting Peaco, which will...Ch. 2 - Suppose the demand (in thousands) for a toaster is...Ch. 2 - The file P02_41.xlsx contains the cumulative...Ch. 2 - A large U.S. drug company, Pharmco, has 100...Ch. 2 - The file P02_43.xlsx contains a template for a car...Ch. 2 - The IRR is the discount rate r that makes a...Ch. 2 - A project does not necessarily have a unique IRR....Ch. 2 - The file P02_46.xlsx contains data on prices of...Ch. 2 - Ewing Natural Gas is a large energy company with...Ch. 2 - The eTech Company is a fairly recent entry in the...

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