SWIMSUIT EXAMPLE
• 2 Stages:
• a retailer who faces customer demand
• a manufacturer who produces and sells swimsuits to the retailer.
• Retailer Information:
• Summer season sale price of a swimsuit is $125 per unit.
• Wholesale price paid by retailer to manufacturer is $80 per unit.
• Salvage value after the summer season is $20 per unit
• Manufacturer information:
• Fixed production cost is $100,000
• Variable production cost is $35 per unit