Write A 1050 Word Report Based On The Bell Computer Company
Writea 1050 Word Report Based On The Bell Computer Company Forecasts
Writea 1050 Word Report Based On The Bell Computer Company Forecasts
Writea 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.
Paper For Above instruction
Introduction
The Bell Computer Company forecast datasets and case study scenarios provide a comprehensive insight into decision-making processes under uncertainty, focusing on profit maximization and risk minimization. This report analyzes two primary cases: the expansion decision for Bell Computer Company and the inventory management decision for Kyle Bits and Bytes. Through probabilistic and statistical methods such as expected value and variance calculations, the report aims to guide optimal strategic choices aligned with organizational objectives.
Case 1: Bell Computer Company
The first case involves evaluating two expansion alternatives—each with distinct profit outcomes based on uncertain future states. The primary goal is to determine which option offers the highest expected profit and to assess the variability associated with each, thus aiding decision-makers in selecting strategies that optimize financial outcomes while considering risk tolerance.
Expected Value Analysis
Expected value (EV) is a fundamental decision criterion in probabilistic scenarios. It is calculated by multiplying each possible profit by its probability and summing the results:
EV = Σ (profit × probability).
Assuming the datasets provide specific profit values and their associated probabilities for each alternative, the EV for each expansion option can be computed accordingly. For instance, if Alternative A has profits of $50,000, $70,000, and $90,000 with probabilities of 0.3, 0.4, and 0.3 respectively, then:
EV_A = (50,000 × 0.3) + (70,000 × 0.4) + (90,000 × 0.3) = $66,000.
Similarly, alternative B's EV would be calculated based on its profit-probability combinations.
Suppose calculations yield:
- EV for Expansion Alternative 1: $75,000
- EV for Expansion Alternative 2: $65,000
Based on the EV criterion, the decision favors Alternative 1, as it provides a higher expected profit.
Variance and Risk Assessment
While expected value guides profit maximization, understanding variability or risk is equally critical. Variance measures the dispersion of profits around the mean and is given by:
Variance = Σ [probability × (profit − EV)^2].
Calculating variance for each alternative reveals the level of uncertainty associated with each option. A higher variance indicates greater risk or volatility. For example, if Alternative 1 has a variance of $100,000, while Alternative 2’s variance is $50,000, an organization prioritizing risk minimization might prefer the less variable option, i.e., Alternative 2, despite its lower EV.
Decision Preferences: Maximize Profit vs. Minimize Risk
The decision criterion depends on the organization’s strategic priorities. If maximizing expected profit is the sole aim, Alternative 1 is preferable. Conversely, if minimizing the variability of profits and associated risks are prioritized, the organization might lean toward Alternative 2, which exhibits lower variance.
Case 2: Kyle Bits and Bytes
The second scenario involves inventory management for Kyle Bits and Bytes, specifically determining the optimal re-order point and reorder quantity for HP laser printers. Proper inventory decisions minimize holding costs and stockout risks, ensuring continuous operations.
Re-Order Point Determination
The re-order point (ROP) is the inventory level that triggers a new order. It is typically calculated as:
ROP = (Average demand during lead time) + (Safety stock).
Using historical demand data for HP laser printers—say, an average daily demand of 20 units with a standard deviation of 5 units, and a lead time of 7 days—the ROP can be calculated. Assuming the manager desires a service level corresponding to a Z-value of 1.65 (for 95% service level), the safety stock becomes:
Safety stock = Z × standard deviation of demand during lead time.
Demand during lead time = 20 units/day × 7 days = 140 units.
Standard deviation during lead time = √7 × 5 ≈ 13.23 units.
Safety stock = 1.65 × 13.23 ≈ 21.86 units.
Thus, ROP = 140 + 22 ≈ 162 units.
Optimal Re-Order Quantity
The Economic Order Quantity (EOQ) model provides a basis for determining the ideal order size, balancing ordering costs and holding costs:
EOQ = √[(2 × D × S) / H],
where D = annual demand, S = ordering cost per order, and H = holding cost per unit annually.
Suppose annual demand D is 7,300 units, the ordering cost S is $50, and the holding cost H per unit is $10. Then:
EOQ = √[(2 × 7300 × 50) / 10] ≈ √[730,000 / 10] ≈ √73,000 ≈ 270 units.
Hence, Kyle should order approximately 270 units per replenishment cycle, aligning reorder points with this order size to optimize inventory levels.
Conclusion
In conclusion, decision-making under uncertainty requires meticulous quantitative analysis. For the Bell Computer Company, selecting the expansion alternative with the highest expected value aligns with profit maximization, but risk considerations through variance analysis are equally vital. For Kyle Bits and Bytes, establishing an optimal re-order point based on demand variability and an optimal order quantity via EOQ models helps maintain a balance between availability and cost efficiency. Integrating these analytical techniques supports evidence-based strategic decisions critical for organizational success and resilience.
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