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Unformatted text preview: Natalya Grauer Homework #2 Shannon Kehl John Lilly #1: Why would a firm want to offer pricing promotions during its peak-demand periods? A firm would want to offer pricing promotions during its peak-demand periods because the promotion may actually increase demand (instead of increasing forward purchasing) therefore greatly increasing overall profits. If forward buying makes up a very small portion of promotion purchases, then it is optimal to offer promotions during peak- demand periods. Why would a firm want to offer pricing promotions during its low-demand periods? A firm would want to offer pricing promotions during its low-demand periods because it could draw in consumers who normally wouldn’t purchase the product. Even though promotions may also cause forward purchasing, total profit is generally higher than it would be without a promotion and average inventory generally decreases. #2: Harley Davidson has its engine assembly plant in Milwaukee and its motorcycle assembly plant in Pennsylvania. Engines are transported between the two plants using trucks, with each trip costing $1,000. The motorcycle plant assembles and sells 300 motorcycles each day . Each engine costs $500, and Harley incurs a holding cost of 20 percent per year . How many engines should Harley load onto each truck? RECHECK MY WORK ON THE DEMAND AND TIME CHANGES Q* = SQRT[(2DC )/(hC)] ₀ Q* = SQRT[(2*109500*1000)/(.2*500)] Q* = 1479.865 trucks/yr. Engines/Truck What is the cycle inventory of engines at Harley?...
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- Fall '10
- Pricing, delivery charge, Natalya Grauer, Shannon Kehl