Operations Management Homework

843 WordsNov 22, 20154 Pages
1. What is the best way to increase value the most, given the following information for one customer? Base Case: Perceived benefits $50 and Price $10.00 Improvement Option A: Perceived benefits $65 and Price $13.00 Improvement Option B: Perceived benefits $65 and Price $12.50 Improvement Option C: Perceived benefits $60 and Price $12.50 We derive the following (using the formula, value = perceived benefits / price (cost) to the customer): * Base Case: value = (50/10) = 5 * Option A: value = (65/13) = 5 * Option B: value = (65/12.50) = 5.20 * Option C: value = (60/12.50) = 4.80 The option B is the best way to increase value the most (but the cost to the customer is higher, and the perceived benefit as well).…show more content…
Use productivity arguments to recommend whether or not to change the current system. 
 Using the formula: = 50 / 1 = 50 = 90 / 3 = 30 It is better not to change the system, since a single worker can handle 50 cars per hour (taking orders, assembling them and acting as a cashier), on the other hand, 3 workers (one taking orders, the second assembling them, and the third acting as cashier) would handle 30 cars each. 10. What is the average value of a loyal customer (VLC) in a target market segment if the average purchase price is $75 per visit, the frequency of repurchase is six times per year, the contribution margin is 10 percent, and the average customer defection rate is 25 percent? Using the formula: VLC = (P) (RF) (CM) (BLC) VLC = (75) (6) (10%) (1/0.25) VLC = $180.00 The average value of a loyal customer (VLC) is $180.00. 12. What is the average defection rate for grocery store shoppers in a local area of a large city if customers spend $60 per visit, customers shop 52 weeks per year, the grocery store has a 12 percent gross mar- gin, and the value of a loyal customer is estimated at $2,750 per year? Using the formula: VLC = (P) (RF) (CM) (BLC) 2,750 = (60) (52) (12%) (1/DF) 2,750 = 374.4 (1/DF) 7.345085 = (1/DF) DF = 1/7.345085 DF = 14% The average defection rate for grocery store shoppers is

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