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Resources: Microsoft Excel®, Bell Computer Company Forecasts Data Set, Case Study Scenarios
Question
Purpose of Assignment
This assignment has two cases. The first case is on expansion strategy. Managers constantly have to make decisions under uncertainty. This assignment gives students an opportunity to use the mean and standard deviation of probability distributions to make a decision on expansion strategy. The second case is on determining at which point a manager should re-order a printer so he or she doesn't run out-of-stock. The second case uses normal distribution. The first case demonstrates application of statistics in finance and the second case demonstrates application of statistics in operations management.
Assignment Steps
Resources: Microsoft Excel®, Bell Computer Company Forecasts data set, Case Study Scenarios
Write a 1,050-word report based on the Bell Computer Company Forecasts data set and Case Study Scenarios.
Include answers to the following:
Case 1: Bell Computer Company
- Compute the expected value for the profit associated with the two expansion alternatives. Which decision is preferred for the objective of maximizing the expected profit?
- Compute the variation for the profit associated with the two expansion alternatives. Which decision is preferred for the objective of minimizing the risk or uncertainty?
Case 2: Kyle Bits and Bytes
- What should be the re-order point? How many HP laser printers should he have in stock when he re-orders from the manufacturer?
Format your assignment consistent with APA format
Solution
Title:
Resources: Microsoft Excel®, Bell Computer Company Forecasts Data Set, Case Study Scenarios
Length:
10 pages
(2000 Words)
Style:
APA
Preview
Case 1: Bell Computer Company
The Bell Computer Company has two expansion options: medium scale, and large scale. For both medium scale expansion and large scale expansion, demand can be low, medium, or high with probability of 0.2, 0.5, and 0.3 respectively. For medium scale expansion, profits in case of low, medium and high demand are $50,000 , $150,000 and $200,000 respectively. For large scale expansion, profits in case of low, medium, and high demand are $0, $100,000 and $300,000 respectively. Management is facing dilemma whether to go for medium scale expansion or large scale expansion. While large scale expansion has potential to generate higher profit in case of high demand, the large scale expansion will generate lower profit than medium scale expansion in case of low and medium demand. In case of low demand, the large scale expansion results in nil profit. Clearly, large-scale expansion bears more risk than the low-scale expansion.
