Case Study – Week 3 Individual Assignment QNT/561 Version 9 University of Phoenix Material Case Study – Bell Computer Company The Bell Computer Company is considering a plant expansion enabling the company to begin production of a new computer product. You have obtained your MBA from the University of Phoenix and, as a vicepresident, you must determine whether to make the expansion a medium- or large- scale project. The demand for the new product involves an uncertainty, which for planning purposes may be low demand, medium demand, or high demand. The probability estimates for the demands are 0.20, 0.50, and 0.30, respectively. Case Study – Kyle Bits and Bytes Kyle Bits and Bytes, a retailer of computing products sells a variety of computer-related products. One of Kyle’s most popular products is an HP laser printer. The average weekly demand is 200 units. Lead time (lead time is defined as the amount of time between when the order is placed and when it is delivered) for a new order from the manufacturer to arrive is one week. If the demand for printers were constant, the retailer would re-order when there were exactly 200 printers in inventory. However, Kyle learned demand is a random variable in his Operations Management class. An analysis of previous weeks reveals the weekly demand standard deviation is 30. Kyle knows if a customer wants to buy an HP laser printer but he has none available, he will lose that sale, plus possibly additional sales. He wants the probability of running short (stock-out) in any week to be no more than 6%. Copyright © 2017 by University of Phoenix. All rights reserved. 1 Expansion Strategy and Establishing a Re-order Point Grading Guide QNT/561 Version 9 Applied Business Research and Statistics Copyright Copyright © 2017, 2015, 2014, 2013, 2012, 2011, 2010, 2009, 2008 by University of Phoenix. All rights reserved. University of Phoenix® is a registered trademark of Apollo Group, Inc. in the United States and/or other countries. Microsoft®, Windows®, and Windows NT® are registered trademarks of Microsoft Corporation in the United States and/or other countries. All other company and product names are trademarks or registered trademarks of their respective companies. Use of these marks is not intended to imply endorsement, sponsorship, or affiliation. Edited in accordance with University of Phoenix® editorial standards and practices. Expansion Strategy and Establishing a Re-order Point Grading Guide QNT/561 Version 9 Individual Assignment: Expansion Strategy and Establishing a Re-order Point Purpose of Assignment 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. Resources Required • • • Microsoft Excel® Bell Computer Company Forecasts data set Case Study Scenarios Grading Guide Content Met Partially Met Not Met 3 #/3 Partially Met Not Met Comments: Write a 1,050-word report based on the Bell Computer Company Forecasts data set and Case Study Scenarios. 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? Writing Guidelines Met Comments: 2 Expansion Strategy and Establishing a Re-order Point Grading Guide QNT/561 Version 9 Writing Guidelines Met Partially Met Not Met Total Available Total Earned 2 #/2 5 #/5 The paper—including tables and graphs, headings, title page, and reference page—is consistent with APA formatting guidelines and meets course-level requirements. Intellectual property is recognized with in-text citations and a reference page. Paragraph and sentence transitions are present, logical, and maintain the flow throughout the paper. Sentences are complete, clear, and concise. Rules of grammar and usage are followed including spelling and punctuation. Assignment Total Additional comments: # Comments: 3 Low Demand Medium High Medium-Scale Large-Scale Expansion Profits Expansion Profits Annual Annual Profit Profit ($1000s) ($1000s) P(x) P(x) 50 20% 0 20% 150 50% 100 50% 200 30% 300 30% Expected Profit ($1000s) Risk Analysis for Medium-Scale Expansion Annual Profit (x) Probability P(x) (x - µ)2 (x - µ)2 * P(x) Demand $1000s (x - µ) Low 50 20% Medium 150 50% High 200 30% σ2 = σ= Risk Analysis for Large-Scale Expansion Annual Profit (x) Probability P(x) (x - µ)2 (x - µ)2 * P(x) Demand $1000s (x - µ) Low 0 20% Medium 100 50% High 300 30% σ2 = σ=
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