Samoto Limited (SL) relies on an external supplier for production capacity. In order to gain access to a certain level of production capacity, SL will have to commit to an annual contract before the start of the operating period. The contract will stipulate the production capacity entitlement of SL. SL has a choice of three contracts: Contract Mega, Contract Upper, and Contract Soso. Regardless of the choice of contract, the company will be subject to three states of nature: high demand, medium demand and low demand. The net profits generated by each of the contracts under the three states of nature are as follows: Net profit (£000) Medium demand High demand Low demand Contract Mega Contract Upper Contract Soso 20,000 17,000 16,500 15,500 16,000 15,000 11,000 12,000 13,000 The probabilities of the states of nature are as follows: High demand Medium demand Low demand Probability 25% 45% 30%

Samoto Limited (SL) relies on an external supplier for production capacity. In order to gain access to a certain level of production capacity, SL will have to commit to an annual contract before the start of the operating period. The contract will stipulate the production capacity entitlement of SL. SL has a choice of three contracts: Contract Mega, Contract Upper, and Contract Soso. Regardless of the choice of contract, the company will be subject to three states of nature: high demand, medium demand and low demand. The net profits generated by each of the contracts under the three states of nature are as follows: Net profit (£000) Medium demand High demand Low demand Contract Mega Contract Upper Contract Soso 20,000 17,000 16,500 15,500 16,000 15,000 11,000 12,000 13,000 The probabilities of the states of nature are as follows: High demand Medium demand Low demand Probability 25% 45% 30%

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section: Chapter Questions

Problem 30P

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Scenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. Is Ben Gibson acting legally? Is he acting ethically? Why or why not?
Scenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. As the Marketing Manager for Southeastern Corrugated, what would you do upon receiving the request for quotation from Coastal Products?
Scenario 4 Sharon Gillespie, a new buyer at Visionex, Inc., was reviewing quotations for a tooling contract submitted by four suppliers. She was evaluating the quotes based on price, target quality levels, and delivery lead time promises. As she was working, her manager, Dave Cox, entered her office. He asked how everything was progressing and if she needed any help. She mentioned she was reviewing quotations from suppliers for a tooling contract. Dave asked who the interested suppliers were and if she had made a decision. Sharon indicated that one supplier, Apex, appeared to fit exactly the requirements Visionex had specified in the proposal. Dave told her to keep up the good work. Later that day Dave again visited Sharons office. He stated that he had done some research on the suppliers and felt that another supplier, Micron, appeared to have the best track record with Visionex. He pointed out that Sharons first choice was a new supplier to Visionex and there was some risk involved with that choice. Dave indicated that it would please him greatly if she selected Micron for the contract. The next day Sharon was having lunch with another buyer, Mark Smith. She mentioned the conversation with Dave and said she honestly felt that Apex was the best choice. When Mark asked Sharon who Dave preferred, she answered, Micron. At that point Mark rolled his eyes and shook his head. Sharon asked what the body language was all about. Mark replied, Look, I know youre new but you should know this. I heard last week that Daves brother-in-law is a new part owner of Micron. I was wondering how soon it would be before he started steering business to that company. He is not the straightest character. Sharon was shocked. After a few moments, she announced that her original choice was still the best selection. At that point Mark reminded Sharon that she was replacing a terminated buyer who did not go along with one of Daves previous preferred suppliers. Ethical decisions that affect a buyers ethical perspective usually involve the organizational environment, cultural environment, personal environment, and industry environment. Analyze this scenario using these four variables.
Scenario 4 Sharon Gillespie, a new buyer at Visionex, Inc., was reviewing quotations for a tooling contract submitted by four suppliers. She was evaluating the quotes based on price, target quality levels, and delivery lead time promises. As she was working, her manager, Dave Cox, entered her office. He asked how everything was progressing and if she needed any help. She mentioned she was reviewing quotations from suppliers for a tooling contract. Dave asked who the interested suppliers were and if she had made a decision. Sharon indicated that one supplier, Apex, appeared to fit exactly the requirements Visionex had specified in the proposal. Dave told her to keep up the good work. Later that day Dave again visited Sharons office. He stated that he had done some research on the suppliers and felt that another supplier, Micron, appeared to have the best track record with Visionex. He pointed out that Sharons first choice was a new supplier to Visionex and there was some risk involved with that choice. Dave indicated that it would please him greatly if she selected Micron for the contract. The next day Sharon was having lunch with another buyer, Mark Smith. She mentioned the conversation with Dave and said she honestly felt that Apex was the best choice. When Mark asked Sharon who Dave preferred, she answered, Micron. At that point Mark rolled his eyes and shook his head. Sharon asked what the body language was all about. Mark replied, Look, I know youre new but you should know this. I heard last week that Daves brother-in-law is a new part owner of Micron. I was wondering how soon it would be before he started steering business to that company. He is not the straightest character. Sharon was shocked. After a few moments, she announced that her original choice was still the best selection. At that point Mark reminded Sharon that she was replacing a terminated buyer who did not go along with one of Daves previous preferred suppliers. What should Sharon do in this situation?
Scenario 4 Sharon Gillespie, a new buyer at Visionex, Inc., was reviewing quotations for a tooling contract submitted by four suppliers. She was evaluating the quotes based on price, target quality levels, and delivery lead time promises. As she was working, her manager, Dave Cox, entered her office. He asked how everything was progressing and if she needed any help. She mentioned she was reviewing quotations from suppliers for a tooling contract. Dave asked who the interested suppliers were and if she had made a decision. Sharon indicated that one supplier, Apex, appeared to fit exactly the requirements Visionex had specified in the proposal. Dave told her to keep up the good work. Later that day Dave again visited Sharons office. He stated that he had done some research on the suppliers and felt that another supplier, Micron, appeared to have the best track record with Visionex. He pointed out that Sharons first choice was a new supplier to Visionex and there was some risk involved with that choice. Dave indicated that it would please him greatly if she selected Micron for the contract. The next day Sharon was having lunch with another buyer, Mark Smith. She mentioned the conversation with Dave and said she honestly felt that Apex was the best choice. When Mark asked Sharon who Dave preferred, she answered, Micron. At that point Mark rolled his eyes and shook his head. Sharon asked what the body language was all about. Mark replied, Look, I know youre new but you should know this. I heard last week that Daves brother-in-law is a new part owner of Micron. I was wondering how soon it would be before he started steering business to that company. He is not the straightest character. Sharon was shocked. After a few moments, she announced that her original choice was still the best selection. At that point Mark reminded Sharon that she was replacing a terminated buyer who did not go along with one of Daves previous preferred suppliers. What does the Institute of Supply Management code of ethics say about financial conflicts of interest?
Donegal Footwear is an international supplier of outdoor footwear for adventurous families. Currently, the company uses a logistical provider to provide warehouse services and handle packages destined for ground delivery. The contract calls for $9 million in annual fixed charges, which covers the provider’s overhead and warehouse costs, and variable costsof $15 per package shipped. Recently, Donegal Footwear found a warehouse it could lease at a cost of $16 million per year, which includes lease costs, labor, and management oversight. Furthermore, the company found another provider who would deliver packages from the warehouse for $6.00 per package. Considering only costs, how many packages must Donegal Footwear ship to make the vertical integration into warehouse operations beneficial?
A firm’s manager must decide whether to make or buy a certain item used in the production of vending machines. Making the item would involve annual lease costs of $150,000. Cost and volume estimates are as follows Make Buy Annual fixed cost $150,000 None Variable cost/unit $ 60 $ 80 Annual volume (units) 12,000 12,000 Given these numbers, should the firm buy or make this item? There is a possibility that volume could change in the future. At what volume would the manager be indifferent between making and buying?
waldo needs to decide how many copies of a new hardcover release to purchase for its shelves. The store has assumed that demand will be 50, 100, 150, or 200 copies next month and they need to decide whether to order 50, 100, 150 or 200 books for this period. Each book costs Waldo PhP50 and can be sold for PhP85. Waldo can sell any unsold books back to their supplier for PhP15. a. Formulate the payoff table. b. Determine the best decision and payoff is maximin and equally likely criteria are used. Answers in figure only without comma or units. If there are more than 2 answers, put an NA to excess brackets. Maximin: Decision: Order Blank 17 Payoff = Blank 18 Equally Likely: Decision: Order Blank 19, Blank 20, Blank 21 Payoff = Blank 22 c. If the coefficient of pessimism is 0.4, determine the best decision and payoff using Hurwicz criterion. Answers in figure only without comma or units. Hurwicz: Decision: Order Blank 23 Payoff= Blank 24
Ross Enterprises has a contract with Big Steel Company Limited in respect of Information Technology (IT) Services. The contract was signed on January 1st 2020 and will be effected on the 1st April 2020. In mid-February 2020 Big Steel’s sales plummeted due to the Covid 19 pandemic. In addition, an already high long term debt, and operating cost, as well as Big Steel’s current negative cash flows situation placed the company in serious financial peril. Indeed if they cannot find a resolution soon to deal with their cash flow problems and debt, they will have to close operations permanently and send all employees home. Upon hearing this pronouncement, the Trade Union representing workers at Big Steel advised management that they will take strike action. This further affected the operations of Big Steel and resulted in a loss of production, sales and the much-needed cash flows, which is critical to pay off their debt and meet current fixed operating cost. On 3rd March 2016, Big Steel…
What is the role of g(gamma) in a R.P.E. linear contract?
Demand for stereo headphones and MP3 players for joggers has caused Nina Industries to grow almost 50 percent over the past year. The number of joggers continues to expand, so Nina expects demand for headsets to also expand, because, as yet, no safety laws have been passed to prevent joggers from wearing them. Demand for the players for last year was as follows: MONTH DEMAND (UNITS) January 4,000 February 4,100 March 3,800 April 4,200 May 4,850 June 4,500 July 5,150 August 4,750 September 5,250 October 5,550 November 6,150 December 5,850 a. Using linear regression analysis, what would you estimate demand to be for each month next year? Using a spreadsheet, follow the general format in Exhibit 3.7. (picture below)(Do not round intermediate calculations. Round your answers to 2 decimal places.) Month Forecast january february march april may june july august september october november december b. To…
Demand for stereo headphones and MP3 players for joggers has caused Nina Industries to grow almost 50 percent over the past year. The number of joggers continues to expand, so Nina expects demand for headsets to also expand, because, as yet, no safety laws have been passed to prevent joggers from wearing them. Demand for the players for last year was as follows: MONTH DEMAND (UNITS) January 4,000 February 4,100 March 3,800 April 4,200 May 4,850 June 4,500 July 5,150 August 4,750 September 5,250 October 5,550 November 6,150 December 5,850 a. Using linear regression analysis, what would you estimate demand to be for each month next year? Using a spreadsheet, follow the general format in Exhibit 3.7. (picture below)(Do not round intermediate calculations. Round your answers to 2 decimal places.) Month Forecast january february march april may june july august september october november december