PLEASE Make a decision tree diagram and show all payoffs!!! You are a logistics manager for Alphasmart, a smartphone manufacturer. You are trying to select a single supplier for the raw materials for your product. Two companies can provide the necessary materials – Hunts and Madis. Hunts has sufficient capacity to meet your demand and charges $5.00 per unit. Madis is a small supplier with a limited capacity, can supply up to 36,000 units per year, and charges $4.50 per unit of the raw material. If you do not get raw material from your supplier, you buy from the spot market at $10 per unit. Alphasmart sold 30,000 smartphones last year and estimates demand for smartphones to go up by 20% with a probability of 60 percent and to remain the same as last year with a probability of 40% for the first year. The same percentage increase in demand and probability would apply for the second year as well. Alphasmart uses a discount rate of 10 percent. Assume all costs are incurred at the end of the year and you can select only one supplier for both years. Which supplier would you select based on the present value of two-year cost? Make a decision tree diagram and show all payoffs. Note: you need to discount the first year as well the second-year payoffs.
PLEASE Make a decision tree diagram and show all payoffs!!!
You are a logistics manager for Alphasmart, a smartphone manufacturer. You are trying to select
a single supplier for the raw materials for your product. Two companies can provide the necessary
materials – Hunts and Madis.
Hunts has sufficient capacity to meet your demand and charges $5.00 per unit. Madis is a small
supplier with a limited capacity, can supply up to 36,000 units per year, and charges $4.50 per
unit of the raw material. If you do not get raw material from your supplier, you buy from the spot
market at $10 per unit.
Alphasmart sold 30,000 smartphones last year and estimates demand for smartphones to go up by
20% with a probability of 60 percent and to remain the same as last year with a probability of
40% for the first year. The same percentage increase in demand and probability would apply for
the second year as well. Alphasmart uses a discount rate of 10 percent. Assume all costs are
incurred at the end of the year and you can select only one supplier for both years.
Which supplier would you select based on the present value of two-year cost? Make a decision
tree diagram and show all payoffs.
Note: you need to discount the first year as well the second-year payoffs.
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