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Business, 22.04.2021 15:50 kace04

A distributor is negotiating a supply contract for one of its item. The end-customer demand is forecasted as follows: Demand Probability 0.4 Quantity 20,000 30,000 45,000 60,000 0.2 0.35 0.05
The current parameters are as follows:
Price charged by distributor to end-customer
Price charged by supplier to distributor
Buyback price offered by supplier
Salvage value
Fixed manufacturing cost
Variable manufacturing cost $100/unit $70/unit $40/unit $10/unit $45/unit
What is the optimal order quantity for the distributor under the buyback contract?

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