Dave Escalona, a DLSL Computer Engineering graduate, is considering the possibility of opening a small computer shop at SM City Lipa, a few blocks from the school. His options are to open a small shop, a medium-sized shop or no shop at all. The market for the computer shop can be good, average or bad. The probabilities for these possibilities are 0.2 for good market, 0.5 for average market and 0.3 for bad market. The net profit or loss for the medium-sized or small shop for the various market conditions are given in the table below. Building no shop also yields no loss and no gain. What do you recommend? Good Market Average Market Bad Market Alternatives P P P Small shop 75,000 25,000 -40,000 Medium-sized shop 100,000 35,000 -60,000 No shop 0 0 0 Probabilities 0.2 0.5 0.3
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Dave Escalona, a DLSL Computer Engineering graduate, is considering the possibility of opening a small computer shop at SM City Lipa, a few blocks from the school. His options are to open a small shop, a medium-sized shop or no shop at all. The market for the computer shop can be good, average or bad. The probabilities for these possibilities are 0.2 for good market, 0.5 for average market and 0.3 for bad market. The net profit or loss for the medium-sized or small shop for the various market conditions are given in the table below. Building no shop also yields no loss and no gain. What do you recommend?
Good Market | Average Market | Bad Market | |
Alternatives | P | P | P |
Small shop | 75,000 | 25,000 | -40,000 |
Medium-sized shop | 100,000 | 35,000 | -60,000 |
No shop | 0 | 0 | 0 |
Probabilities | 0.2 | 0.5 | 0.3 |
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- It costs a pharmaceutical company 75,000 to produce a 1000-pound batch of a drug. The average yield from a batch is unknown but the best case is 90% yield (that is, 900 pounds of good drug will be produced), the most likely case is 85% yield, and the worst case is 70% yield. The annual demand for the drug is unknown, with the best case being 20,000 pounds, the most likely case 17,500 pounds, and the worst case 10,000 pounds. The drug sells for 125 per pound and leftover amounts of the drug can be sold for 30 per pound. To maximize annual expected profit, how many batches of the drug should the company produce? You can assume that it will produce the batches only once, before demand for the drug is known.Scenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. Is Ben Gibson acting legally? Is he acting ethically? Why or why not?Scenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. As the Marketing Manager for Southeastern Corrugated, what would you do upon receiving the request for quotation from Coastal Products?
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