Description
This assignment has two cases. The first case is on expansion strategy. Managers constantly have to make decisions under uncertainty. This assignment gives students an opportunity to use the mean and standard deviation of probability distributions to make a decision on expansion strategy. The second case is on determining at which point a manager should re-order a printer so he or she doesn't run out-of-stock. The second case uses normal distribution. The first case demonstrates application of statistics in finance and the second case demonstrates application of statistics in operations management.
Assignment Steps
Resources: Microsoft Excel®, Bell Computer Company Forecasts data set, Case Study Scenarios
Write a 1,050-word report based on the Bell Computer Company Forecasts data set and Case Study Scenarios.
Include answers to the following:
Case 1: Bell Computer Company
- Compute the expected value for the profit associated with the two expansion alternatives. Which decision is preferred for the objective of maximizing the expected profit?
- Compute the variation for the profit associated with the two expansion alternatives. Which decision is preferred for the objective of minimizing the risk or uncertainty?
Case 2: Kyle Bits and Bytes
- What should be the re-order point? How many HP laser printers should he have in stock when he re-orders from the manufacturer?
Format your assignment consistent with APA format.
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Explanation & Answer
Attached.
Running head: BELL COMPUTER COMPANY AND KYLE BITS AND BYTES
Bell Computer Company and Kyle Bits and Bytes
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Course
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BELL COMPUTER COMPANY AND KYLE BITS AND BYTES
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Case 1 Bell Computer Company
The Bell Company is considering expanding to maximize its presence in the industry. It is,
therefore, necessary to ensure that there is a better understanding of key issues within an
organizational context. The Bell Company is considering two options for its expansion strategy,
medium expansion or large expansion. Therefore, it is important to consider analysis to create a
significant environment where a better decision can be made. In both medium and large scale
expansion, the demand can assume low, medium and high where the profit margin is varying based
on the level of demand. Low, medium and high demand assumes the probabilities 0.2, 0.5 and 0.3
respectively. This means that there exist 20% chance that under both medium and large expansion
the demand will be low, 50% that the demand will be medium and 30% chance that the demand
will be high.
When considering medium expansion, the anticipated profits include $50,000 under low
demand, $150,000 under medium demand and $200,000 under high demand. Under the Large
expansion, the expected profits include $0 under low demand, $100,000 under medium demand
and $300,000 under high demand. Therefore, in this case, it is very clear that large expansion is
likely to generate high profits, especially in high demand although there exists only 30% chance
that the demand will be high. This shows that choosing large-scale expansion is a risk...