Homework: Chapter 23 PRICE (Kopeks per set of nesting...

Homework: Chapter 23 PRICE (Kopeks per set of nesting dolls) 200 180 160 140 120 100 80 60 40 20 0 Supply 350, 20 Demand 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Millions of sets of nesting dolls per month) If the central planners mandate the production of 250 million sets of nesting dolls per month, but allow the market to determine the price, the price of a set of nesting dolls will be Now suppose the central planners mandate the production of 250 million sets of nesting dolls and fix the price at 20 kopeks per set of nesting dolls, as represented by the horizontal tan drop line (dash symbol) in the graph. At 20 kopeks per set of nesting dolls, the quantity of sets of nesting dolls demanded is to per month, which is the mandated production level, leading of sets of nesting dolls per month.

Transcript

00:01 In preparing for the upcoming holiday season, fresh toy company designed a new doll called the doggie that teaches children how to dance.

00:08 The fixed cost to produce the doll is $100 ,000.

00:11 The variable cost, which includes material labor and shipping costs, is $34 per doll.

00:15 During the holiday season, ftc will sell the dolls for $42 each.

00:21 If ftc overproduces the dolls, the excess dolls will be sold in january through a distributor who charges, i'm sorry, who has agreed to pay ftc $10 per doll.

00:34 I read that wrong.

00:36 Demand for new toys during the holiday season is extremely uncertain.

00:40 Forecasts for expected sales.

00:42 So we have a mu of 60 ,000 and a standard deviation of 15 ,000.

00:49 The normal probability distribution is assumed to be a good description of the demand.

00:53 Ftc has tentatively decided to produce 60 ,000 units, the same as average demand.

01:00 But it wants to conduct an analysis regarding this production quantity before finalizing the decision.

01:06 So create a what -if spreadsheet model using a formula that relates the values of production quantity, demand, sales, revenue, amount of surplus, revenue.

01:16 So we have a whole big list.

01:18 And the idea is to get to what should the profit be.

01:22 So let's start our table and we'll start with the production quantity.

01:36 And we're going to do three.

01:37 We're going to do 60 ,000, then we're going to do 70 ,000, and then we're going to do 50 ,000.

01:49 So we'll start with our demand, and we'll do, so some of this work i'll probably do a little bit below.

01:56 But for $60 ,000, $60 ,000, not dollars, $60 ,000 products, that's going to have a probability of 0 .5.

02:08 For 70 ,000, we would take $70 ,000, minus $60 ,000.

02:13 And divided by 15 ,000 and then look up that corresponding z value and this one corresponds to 0 .7486 50 ,000 corresponds to 0 .2514.

02:28 So next we'll look at if we have a demand of 50 % that means we sold 30 ,000 for the 70 ,000 we sold 52 ,402 and 50 ,000 we sold 12 ,570.

02:45 So our revenue so selling each doll at $42 a doll, 30 ,000 of them would be $1 .26 million...

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