e knows the back-to-school rush will start in August, and he wants to determine whether the increase in customer traffic at the mall will increase his sales revenue and, if so, by how much? Using Sensitivity analysis.
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Peter sells backpacks at a kiosk in the mall. He knows the back-to-school rush will start in August, and he wants to determine whether the increase in customer traffic at the mall will increase his sales revenue and, if so, by how much? Using Sensitivity analysis.
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- It costs a pharmaceutical company 75,000 to produce a 1000-pound batch of a drug. The average yield from a batch is unknown but the best case is 90% yield (that is, 900 pounds of good drug will be produced), the most likely case is 85% yield, and the worst case is 70% yield. The annual demand for the drug is unknown, with the best case being 20,000 pounds, the most likely case 17,500 pounds, and the worst case 10,000 pounds. The drug sells for 125 per pound and leftover amounts of the drug can be sold for 30 per pound. To maximize annual expected profit, how many batches of the drug should the company produce? You can assume that it will produce the batches only once, before demand for the drug is known.The Tinkan Company produces one-pound cans for the Canadian salmon industry. Each year the salmon spawn during a 24-hour period and must be canned immediately. Tinkan has the following agreement with the salmon industry. The company can deliver as many cans as it chooses. Then the salmon are caught. For each can by which Tinkan falls short of the salmon industrys needs, the company pays the industry a 2 penalty. Cans cost Tinkan 1 to produce and are sold by Tinkan for 2 per can. If any cans are left over, they are returned to Tinkan and the company reimburses the industry 2 for each extra can. These extra cans are put in storage for next year. Each year a can is held in storage, a carrying cost equal to 20% of the cans production cost is incurred. It is well known that the number of salmon harvested during a year is strongly related to the number of salmon harvested the previous year. In fact, using past data, Tinkan estimates that the harvest size in year t, Ht (measured in the number of cans required), is related to the harvest size in the previous year, Ht1, by the equation Ht = Ht1et where et is normally distributed with mean 1.02 and standard deviation 0.10. Tinkan plans to use the following production strategy. For some value of x, it produces enough cans at the beginning of year t to bring its inventory up to x+Ht, where Ht is the predicted harvest size in year t. Then it delivers these cans to the salmon industry. For example, if it uses x = 100,000, the predicted harvest size is 500,000 cans, and 80,000 cans are already in inventory, then Tinkan produces and delivers 520,000 cans. Given that the harvest size for the previous year was 550,000 cans, use simulation to help Tinkan develop a production strategy that maximizes its expected profit over the next 20 years. Assume that the company begins year 1 with an initial inventory of 300,000 cans.Sunny Groves is a citrus grower in a southern state that has several citrus orchards. Weather forecasters are predicting a significant drop in temperatures over the next two days. The forecast calls for a 25% chance of near-freezing temperatures and a 10% chance of a deep freeze. The management of Sunny Groves is concerned that the impending bad weather may damage their crop of citrus fruit. If the weather is fine, the company stands to make 1,000,000 revenue for their harvest. There are three options that the company can take in light of the coming weather: 1. Do nothing and hope for the best. If the orchards experience near-freezing temperatures, the company will lose half of its crop (and half the revenue). A deep freeze would destroy all of the fruit (and lead to no revenue). Obviously, taking no precautions costs nothing. 2. Take moderate precautions. This involves having many workers placing heaters and warming tents about the orchards. This would cost $50,000 and reduce the…
- In the past, Peter Kelle's tire dealership in Baton Rouge sold an average of 1,000 radials each year. In the past 2 years, 240 and 240, respectively were sold in fall, 350 and 320 in winter,150 and165 in spring, and 340 and 195 in summer. With a major expansion planned, Kelle projects sales next year to increase to 1,200 radials. Based on next year's projected sales, the demand for each season is going to be (enter your responses as whole numbers): Fall: Winter: Spring: Summer:Garfield Industries is expanding its operations throughout the Southeast United States. Garfield anticipates that the expansion will increase sales by $1,000,000 and increase operating costs (excluding depreciation and amortization) by $700,000. Depreciation and amortization expenses will rise by $50,000, interest expense will increase by $150,000, and the company’s tax rate will remain at 40 percent. If the company’s forecast is correct, how much will net income increase or decrease, as a result of the expansion?Khyber Teaching Hospital is considering the purchase of a new ambulance. Thedecision will rest partly on the anticipated mileage to be driven next year. The milesdriven during the last five years are as follows.Year 1 2 3 4 5Mileage 4,000 5,000 4,400 4,800 4,700 Compute the forecast for year 6 using exponential smoothing, an initial forecast foryear 1 of 4,000 miles and α = 0.5
- Demand for haircut at PogiPoints Barber Shop has increased steadily for the past few months as seen in the following time series data. Do the necessary computations and choose the best answer that would complete each statement. With weights of 0.5, 0.3, and 0.2, the WMA forecast for Month 6 would be: * A. 565 haircuts B. 574 haircuts C. 578 haircuts D. 584 haircutsGotham City has 10,000 streetlights. City investigatorshave determined that at any given time, an average of 1,000lights are burned out. A streetlight burns out after an averageof 100 days of use. The city has hired Mafia, Inc., to replaceburned-out lamps. Mafia, Inc.’s contract states that thecompany is supposed to replace a burned-out street lamp inan average of 7 days. Do you think that Mafia, Inc. is livingup to the contract?The Reeves twins are in the yard maintenance business. They want to start doing snow removal during the winter season because they practically don't have any yards to maintain. The twins are trying to determine how much equipment they need to purchase. The twins plan to do most of the work themselves and then hire some part-time workers on an individual job basis to help out. The twins gathered some data on past weather. Based on the information, they predict that there will be six big snowstorms in the coming winter. Most of their clients want the snow removed no more than two days after the snow stops falling. If the twins work for 10 hours a day, they can remove the snow from the driveway of a home in about 1 hour. However, for commercial parking lots and public sidewalks, it will take 4 hours. The variable cost per job is $12 for home driveways and $47 for commercial parking lots. The twins estimated that they will have no more than 40 homeowners and 25 businesses who would like…
- Mike Thatcher is a sales manager for an automobile dealership in Alberta. Mike earns a bonus each year based on revenue generated by the number of vehicles sold in the year less related warranty expenses. The quality of automobiles sold each year seems to vary since the warranty experience related to vehicles sold is highly variable. The actual warranty expenses have varied over the past 10 years from a low of 3% of an automobile’s selling price to a high of 10%. In the past, Mike has tended toward estimating warranty expenses on the high end just to be prudent. It is the end of the year and once again he must work with the dealership’s accountant in arriving at the warranty expense accrual for the cars sold this year. Required 1. Does the warranty accrual decision present any kind of ethical dilemma for Mike Thatcher? 2. Since the warranty experience is not constant, what percent do you think Mike should choose for this year? Justify your response.OPERATIONS RESEARCH TWO Sakala is interested in developing and marketing a new drug. The cost of extensive research to develop the drug would be K100,000. The manager of research programme said that there is 60% chance that the drug will be developed successfully. The market potential is assessed as follows with present value of profit: Market conditions Probability Present value of profits (K) Large market potential 0.1 500,000 Moderate market potential 0.6 220,000 Low market potential 0.3 80,000 The present value figures do not include the cost of research. While Mr. Sakala was considering this proposal, another similar proposal came up which also required the investment of K100,000 .The present value of profit for the second proposal wasK120,000. The return on the investment in the second proposal is almost certain. Draw a decision tree for Mr. Sakala indicating all choices and events What decision Mr. Sakala should take regarding the…In the past, Peter Kelle's tire dealership in Baton Rouge sold an average of 1,000 radials each year. In the past 2 years, 220 and 250, respectively were sold in fall, 360 and 320 in winter, 145 and 175 in spring, and 300 and 230 in summer. With a major expansion planned, Kelle projects sales next year to increase to 1,200 radials. Based on next year's projected sales, the demand for each season is going to be (enter your responses as whole numbers): Season Demand Fall nothing