The risk-free rate of return is 2% and the expected return on the market portfolio is 8%. Oklahoma Oilco has a beta of 2.0 and a
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Answer:
9644
Explanation:
cost of paper on which a card is printed = $0.40 per card
cost of printing = $0.10 per card
profit made per card sold = $3.75
number of areas where customers are located (n)= 4
mean of customers from each region = 2300
standard deviation for each region = 200
note : each region is independent
The optimal production quantity for the card can be calculated going through these steps
first we determine
the cost of card = $0.10 + $0.40 = $0.50
selling value = $3.75
salvage value = 0
next we calculate for the z value
= ( selling value - cost of card) / ( selling price - salvage value )
= ( 3.75 - 0.50 ) / 3.75 = 0.8667
Z( 0.8667 ) = 1.110926 ( using excel formula : NORMSINV ( 0.8667 )
next we calculate
<em>u</em> = n * mean demand
= 4 * 2300 = 9200
б = = 200 * 2
= 400
Hence optimal production quantity for the card
= <em>u</em> + Z (0.8667 ) * б
= 9200 + 1.110926 * 400
= 9644.3704
≈ 9644