Expert answer:Expansion Strategy and Establishing a Re-Order PointThis 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 CompanyCompute 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 BytesWhat 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.TEAM WORK -Super Fun Toys Case StudyThe purpose of this assignment is for students to learn how to make managerial decisions using a case study on Normal Distribution. This case uses concepts from Weeks 1 and 2. It provides students an opportunity to perform sensitivity analysis and make a decision while providing their own rationale. This assignment also shows students that statistics is rarely used by itself. It shows tight integration of statistics with product management. Assignment Steps Resources: Microsoft Excel®, SuperFun Toys Case Study, SuperFun Toys Case Study Data Set Review the SuperFun Toys Case Study and Data Set. Develop a 250 word case study analysis including the following:Use the sales forecaster’s prediction to describe a normal probability distribution that can be used to approximate the demand distribution. LaideSketch the distribution and show its mean and standard deviation. Hint: To find the standard deviation, think Empirical Rule covered in Week 1. Laide
qnt561_grading_guide_week3.doc
qnt_561_bell_company_case.xlsx
qnt561_r9_case_study_scenarios_week_3.doc
qnt561_r9_superfun_case_study_week_3.doc
qnt_561_superfun_toy_case_study.xlsx
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Expansion Strategy and Establishing a
Re-order Point Grading Guide
QNT/561 Version 9
Applied Business Research and Statistics
Copyright
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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=
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
Case Study – SuperFun Toys
QNT/561 Version 9
University of Phoenix Material
Case Study – SuperFun Toys
SuperFun Toys, Inc., sells a variety of new and innovative children’s toys. Management learned the preholiday season is the best time to introduce a new toy because many families use this time to look for
new ideas for December holiday gifts. When SuperFun discovers a new toy with good market potential, it
chooses an October market entry date. To get toys in its stores by October, SuperFun places one-time
orders with its manufacturers in June or July of each year.
Demand for children’s toys can be highly volatile. If a new toy catches on, a sense of shortage in the
marketplace often increases the demand to high levels and large profits can be realized. However, new
toys can also flop, leaving SuperFun stuck with high levels of inventory that must be sold at reduced
prices. The most important question the company faces is deciding how many units of a new toy should
be purchased to meet anticipated sales demand. If too few are purchased, sales will be lost; if too many
are purchased, profits will be reduced because of low prices realized in clearance sales.
This is where SuperFun feels that you, as an MBA student, can bring value.
For the coming season, SuperFun plans to introduce a new product called Weather Teddy. This variation
of a talking teddy bear is made by a company in Taiwan. When a child presses Teddy’s hand, the bear
begins to talk. A built-in barometer selects one of five responses predicting the weather conditions. The
responses range from “It looks to be a very nice day! Have fun” to “I think it may rain today. Don’t forget
your umbrella.” Tests with the product show even though it is not a perfect weather predictor, its
predictions are surprisingly good. Several of SuperFun’s managers claimed Teddy gave predictions of the
weather that were as good as many local television weather forecasters.
As with other products, SuperFun faces the decision of how many Weather Teddy units to order for the
coming holiday season. Members of the management team suggested order quantities of 15,000, 18,000,
24,000, or 28,000 units. The wide range of order quantities suggested indicates considerable
disagreement concerning the market potential.
Having a sound background in statistics and business, you are required to perform statistical analysis and
the profit projections which is typically done by the product management group. You want to provide
management with an analysis of the stock-out probabilities for various order quantities, an estimate of the
profit potential, and to help make an order quantity recommendation.
SuperFun expects to sell Weather Teddy for $24 based on a cost of $16 per unit. If inventory remains
after the holiday season, SuperFun will sell all surplus inventories for $5 per unit. After reviewing the
sales history of similar products, SuperFun’s senior sales forecaster predicted an expected demand of
20,000 units with a 95% probability that demand would be between 10,000 units and 30,000 units.
Copyright © 2017 by University of Phoenix. All rights reserved.
1
Order Quantity
Purchase Cost per unit
15,000
$ 16.00
Sales
Pessimistic
Likely
Optimistic
Order Quantity
Purchase Cost per unit
Order Quantity Total Cost
10,000
20,000
30,000
Pessimistic
Likely
Optimistic
$
Order Quantity Total Cost
10,000
20,000
30,000
Pessimistic
Likely
Optimistic
18,000
18,000
18,000
Order Quantity Total Cost
10,000
20,000
30,000
Total Revenue
@ $24.00 @ $5.00
20,000
20,000
20,000
24,000
$ 16.00
Sales
Pessimistic
Likely
Optimistic
Order Quantity
Purchase Cost per unit
Total Revenue
@ $24.00 @ $5.00
20,000
16.00
Sales
Order Quantity
Purchase Cost per unit
15,000
15,000
15,000
18,000
$ 16.00
Sales
Order Quantity
Purchase Cost per unit
Total Revenue
@ $24.00 @ $5.00
Order Quantity Total Cost
10,000
20,000
30,000
Total Revenue
@ $24.00 @ $5.00
24,000
24,000
24,000
28,000
$ 16.00
Sales
Pessimistic
Likely
Optimistic
Order Quantity Total Cost
10,000
20,000
30,000
28,000
28,000
28,000
Total Revenue
@ $24.00 @ $5.00
Profit
Profit
Profit
Profit
Profit
Order Quantity
Purchase Cost per unit
$
16.00
Sales
Pessimistic
Likely
Optimistic
Order Quantity Total Cost
10,000
20,000
30,000
Total Revenue
@ $24.00 @ $5.00
Profit
…
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