A movie studio sells the latest movie on DVD to Blockbuster
Question #2 [Refund Contract]
A movie studio sells the latest movie on DVD to Blockbuster at $10 per DVD. The marginal production cost for the movie studio is $1 per DVD. Blockbuster prices each DVD at $20 to its customers. DVD s are kept on the regular rack for a one-month period, after which they are discounted down to $5, Blockbuster places a single order for DVDs. Their current forecast is that sales will be normally distributed, with a mean of 10,000 and a standard deviation of 5,000.
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a. How many DVDs should Blockbuster order?
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b. What is its expected profit?
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c. How many DVDs does it expect to sell at a discount?
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d. What is the profit that the studio makes given Blockbuster's actions?
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A plan under discussion is for the studio to refund Blockbuster $4 per DVD that does not sell during the one-month period. As before, Blockbuster will discount them to $5 and sell any that remain.
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e. Under this plan, how many DVDs should Blockbuster order?
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f. What is the expected profit for Blockbuster?
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g. How many DVDs are expected to be unsold at the end of the month?
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h. What is the expected profit for the studio?
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i. What should the studio do?
Answers
Status NEW
Posted 21 May 2017 03:05 PM
My Price 7.00
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Attachments
file 1495380604-Answer.docx preview (517 words )
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