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Management Studies

Top Gun Records and several movie studios have decided to sign a revenue-sharing contract for DVDs. Each DVD costs the studio $2 to produce. The DVD will be sold to Top Gun for $3. Top Gun in turn prices a DVD at $15 and forecasts demand to be normally distributed, with a mean of 5,000 and a standard deviation of 2,000. Any unsold CDs are discounted to $1, and all sell at this price. Top Gun will share 35 percent of the revenue with the studio, keeping 65 percent for itself.

- a) How many CDs should Top Gun order?

- b) What is the profit that Top Gun expects to make?

- c) What is the profit that the studio expects to make?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M9700444

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