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Case Study week 4

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Case Study:
Southwestern University: F The recent success of Southwestern University’s football program is causing SWU’s president, Joel Wisner, more problems than he faced during the team’s losing era in the early 1990s. For one thing, increasing game-day attendance is squeezing the town of Stephenville, Texas and the campus. Complaints are arising over parking, seating, concession prices, and even a shortage of programs at some games. Dr. Wisner, once again, turns to his stadium manager, Hank Maddux. This time, he needs a guaranteed revenue stream to help fuel the stadium expansion. One source of income could easily be the high-profit game programs. Selling for $6 each, programs are a tricky business. Under substantial pressure from …show more content…

And two of every three people buy a program. In addition to the programs, Maddux must purchase the inserts for each game. The inserts have information about the opposing team, photos of the expected starters, and recent game statistics. The purchasing issue is the same for inserts, except inserts will be purchased separately for each game and are a total loss after the game. The carrying cost, because inserts are to be delivered just as they are needed, should be nominal; he estimates 5%. The other costs and the same discount schedule apply, but the inserts only cost half as much because they are much smaller. First Printing will give the same 10% discount on the inserts. Givens: Annual demand is 300,000 (60,000 per game times 5 games) Set-up cost for programs is $1,000.00 Holding cost is 40%
DISCUSSION QUESTIONS 1. With whom should Maddux place the order for the programs, and how many should he order each time? 2. With whom should Maddux place the order for the inserts, and how many should he order each time? 3. What is Maddux’s total cost for programs with inserts for the season? 4. What other program management opportunities might Maddux pursue?

Solution:
1. With whom should Maddux place the order for the programs and how many should he order each time?

D = 60000 * 5 * 2/3
= 200000
H = 0.5 * unit price
S quality printing = 100
S first printing = 100 + .9*(200) = 280
For quality printing
Q = √2DS / IP
Q1 = √2(200000)(100) / 0.5*5 = 4000

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