The selling price of a book is $12. The manufacturing cost per unit is $1. If WeBooks keeps all of the profits from the sale by selling directly to the customer (produce at cost $1 and sell at price $12), what is the optimal recommended service level and therefore how many books should WeBooks produce? Now suppose WeBooks sells the books to the local event manager for $6.00, who then sells to end customers at a retail price of $12 per unit. What is the event manager's perspective on this product? I.e. for the event manager what is the service level of this product? Now suppose WeBooks offers to buy unsold books from the event manager for a buy-back value of $2. No shipping cost is incurred for the return. Assume $6 wholesale price, $12 retail price, etc., but now a $2 buy back offer. What is the optimal service level for the retailer?
