The company Litely sells 1,350 electrical switches per year and at the same time, it makes orders of 300 switches. They don’t have any safety stock. Litely calculates that they have a 50% of probabilities of not having stockout in each cycle. The probability of stockout of 5, 10 and 15 units is 0.2, 0.15 and 0.15 respectively. It has been calculated a production cost per unit and year of 5 dollars and of 6 dollars in case of stockout (3 dollars of profit loss per switch and additionally 3 more dollars of future sold loss). Which should Litely use as the level of safety stock for this product? (Consider a safety stock of 0, 5, 10 and 15 units).
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The company Litely sells 1,350 electrical switches per year and at the same time, it makes
orders of 300 switches. They don’t have any safety stock. Litely calculates that they have a 50%
of probabilities of not having stockout in each cycle. The probability of stockout of 5, 10 and 15
units is 0.2, 0.15 and 0.15 respectively. It has been calculated a production cost per unit and
year of 5 dollars and of 6 dollars in case of stockout (3 dollars of
additionally 3 more dollars of future sold loss). Which should Litely use as the level of safety
stock for this product? (Consider a safety stock of 0, 5, 10 and 15 units).
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You can assume that once this change is generated, it will be the same for each year. You can also assume that the company will change its selling price by the same percentage each year. The fixed cost of developing the doll (which is incurred right away, at time 0) has a triangular distribution with parameters 5 million, 7.5 million, and 12 million. Right now there is one competitor in the market. During each year that begins with four or fewer competitors, there is a 25% chance that a new competitor will enter the market. Year t sales (for t 1) are determined as follows. Suppose that at the end of year t 1, n competitors are present (including Play Things). Then during year t, a fraction 0.9 0.1n of the company's loyal customers (last year's purchasers) will buy a doll from Play Things this year, and a fraction 0.2 0.04n of customers currently in the market ho did not purchase a doll last year will purchase a doll from Play Things this year. Adding these two provides the mean sales for this year. Then the actual sales this year is normally distributed with this mean and standard deviation equal to 7.5% of the mean. a. Use @RISK to estimate the expected NPV of this project. b. Use the percentiles in @ RISKs output to find an interval such that you are 95% certain that the companys actual NPV will be within this interval.Based on Babich (1992). Suppose that each week each of 300 families buys a gallon of orange juice from company A, B, or C. Let pA denote the probability that a gallon produced by company A is of unsatisfactory quality, and define pB and pC similarly for companies B and C. If the last gallon of juice purchased by a family is satisfactory, the next week they will purchase a gallon of juice from the same company. If the last gallon of juice purchased by a family is not satisfactory, the family will purchase a gallon from a competitor. Consider a week in which A families have purchased juice A, B families have purchased juice B, and C families have purchased juice C. Assume that families that switch brands during a period are allocated to the remaining brands in a manner that is proportional to the current market shares of the other brands. For example, if a customer switches from brand A, there is probability B/(B + C) that he will switch to brand B and probability C/(B + C) that he will switch to brand C. Suppose that the market is currently divided equally: 10,000 families for each of the three brands. a. After a year, what will the market share for each firm be? Assume pA = 0.10, pB = 0.15, and pC = 0.20. (Hint: You will need to use the RISKBINOMLAL function to see how many people switch from A and then use the RISKBENOMIAL function again to see how many switch from A to B and from A to C. 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Lemingtons must take delivery for at least 0.8x dresses and can, if desired, take delivery on up to x dresses. Each dress sells for 160 and Hudson charges 50 per dress. If Lemingtons does not take delivery on all x dresses, it owes Hudson a 5 penalty for each unit of reserved capacity that is unused. For example, if Lemingtons orders 450 dresses and demand is for 400 dresses, Lemingtons will receive 400 dresses and owe Jean 400(50) + 50(5). How many units of capacity should Lemingtons reserve to maximize its expected profit?
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