9-698-053
REV: AUGUST 30, 2002
V.G. NARAYANAN
ANANTH RAMAN
Hamptonshire Express
Problem #1
Anna Sheen, upon graduating from a Boston-area university with a degree in journalism and operations research, returned to her hometown of Hamptonshire, Pennsylvania, to start a daily newspaper. The Hamptonshire Express emphasized local news which Sheen believed was not adequately covered by big-city newspapers such as the The Philadelphia Inquirer, Pittsburgh PostGazette, and The New York Times.
Sheen daily wrote stories and articles around news and feature material that she gathered from around town, and typeset the newspaper using desktop software and a PC leased from a large
Pittsburgh-area retailer. She estimated her lease cost
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# hours invested daily in creating the profile section for a particular day
# hours invested in creating the profile section on a given day
The function in Figure 1 can be expressed as a simple equation: D 500 h 500 50 h , where D is daily demand for The Hamptonshire Express, and h the number of hours Sheen has invested in creating the profile section.
As before, Sheen forecast demand for the following day’s newspapers every evening based on the quality of the profile section, and used her demand forecast to determine her stocking quantity.
a.
How many hours should Sheen invest daily in the creation of the profile section? Assume the opportunity cost of her time (based on other employment opportunities in Hamptonshire) to be $10 per hour. Try different values for h in the spreadsheet “Hamptonshire Express:
Problem #2.” (To make your life easier, optimal stocking quantity, Q, is computed by the spreadsheet based on the newsvendor formula for your choice of h .)
b.
What explains Sheen’s choice of effort level h ? Do not spend more than 10 minutes thinking about this question. (Hint: Sheen would choose h to equate marginal cost of effort with marginal benefit. The marginal cost of her effort is $10 per hour; that is, the opportunity cost of her time, the marginal benefit of her effort is
2
0.8 * 50
SQRT(2 * F * T / H) = (2 * 80 * 200,000 / 1.00)0.5
The next task is to provide the optimum number of shoelaces to order, using appropriate cost balancing. The economic order quantity (EOQ) is the order amount that allows for an optimum level of materials at the lowest cost possible. There is a demand ofr 300,000 shoelaces per year. The setup cost is $125 per order. There is a $.10 holding cost per unit. The optimal order quantity recommended is 27,386.13 shoelaces per order, with a maximum inventory of 27,386.13. This means that we will order just the amount of shoelaces needed to fulfill current production orders. The average inventory is 13,693.06 shoelaces. There will be approximately 10.95 orders per year. The annual setup cost is $1,369.31, and the annual holding cost is $1,369.31. This makes the total cost per year $2, 738.61. This decision tool allows us to calculate the correct amount needed per order to ensure that we are lowering operating and holding costs, while keeping production properly stocked.
This ties in significantly with the fact that the concept from opening of the Abbey in 2009 has since wallowed. The entrepreneurial and perhaps managerial aspects of the Abbey have waned resulting in poor standards of service (Parsa et al. 2005). This is reflective almost in
The stocking quantity and expected profits are higher in the second scenario because of the extra time spent to improve the quality of profile section. By spending the extra time to improve the profile section, Anna Sheen increased the overall quality of her newspaper, which will, most likely, lead to an increased probability of demand for her newspaper around the area. This increased demand will raise Anna Sheen’s stocking quantity and the daily expected profits that are associated with that individual stocking quantity.
$ 4,000 8 Purchase 800 units @ $10.40 = 8,320 16 Purchase 600 units @ $10.80 = 6,480 24 Purchase 200 units @ $11.60 = 2,320 2,000 $21,120 Required: (a) Calculate the ending inventory using FIFO assuming 400 units remain on hand at May 31. (show calculations) (b) Calculate the ending inventory using average cost assuming 400 units remain on hand at May 31. (show calculations) Part E (10
Mallory decides to spend three hours working overtime rather than watching a video with her friends. She earns $8 an hour. Her opportunity cost of working is
Using the spreadsheet, we found Q* = NORM.INV(.8,500,100) = 584.16. The simulation and newsvendor model give the same optimal stocking quantity.
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Jerkiewicz, who worked in the newspaper business for 15 years, said the subscriptions have fallen drastically. In 1995 the newspaper has about 24,000 copies in circulation, but in 2010, only has 9,000 copies in circulation. The readers however, had not quit reading the news, but had turned to online sources. He adds that magazines and newspapers should have a strong digital marketing plan. He thinks that traditional printing will continue to decline, but will never die out. There will still be a market, but it will just be smaller than it is now. He says that Kindle had not run print books out of business, and it never will. He adds that printing is so cheap now that printers are going out of business because falling subscription levels are leading to
3. Suppose that if you buy one Big Mac that gives you marginal utility of 500 and a second
The determination of these values requires you to add columns to the Inventory Analysis worksheet. Mr. Milligan asks you to use the worksheet provided. As Mr. Milligan will use the Inventory Analysis worksheet during a presentation, he wants the worksheet to have a professional appearance. To enhance the worksheet’s appearance, you include an appropriate header and format to the worksheet, column, and row labels. The header should display the name of the business, the name of the worksheet, and the current date. As you construct the worksheet, you use the currency format for all columns containing dollar values. Also, for any column that contains a percentage, you
Optimal Cash Replenishment Level Rose Axels faces a smooth annual demand for cash of $5,000,000, incurs transaction costs of $275 every time they sell marketable securities, and can earn 4.3 percent on their marketable securities. What will be their optimal cash replenishment level? (LG8)
5. From the information we get above, I would recommend an order quantity that can maximize the expected profit, and it can be calculated by the formula below: P(Demand<=Q) = C1/(C1+C2).
Q.1) Compute the following quantities for the current production process as well as for Mike’s and Ike’s plans, assuming the plans are implemented as described in the case.
So, newspapers began to focus on the public they served and wanted to create content to make their papers more appealing. They began to obtain crime statistics and information from criminal and divorce courts to fill their papers with content that interested their readers. Advertisements were heavily depended on for these newspapers and they made the lost cost possible. Changes that were made to the newspaper during this time period guided the way papers operate today as they continue to rely on advertisements that make the low costs possible. The journalists of this time period began to pay more attention to the