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 the normal distribution. The first case demonstrates application of statistics in finance and the second case demonstrates application of statistics in operations management.
Resources: Microsoft Excel®, Bell Computer Company Forecasts data set, Case Study Scenarios
Using the provided Excel file, 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? Justify your answer.
- 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? Justify your answer.
Case 2: Kyle Bits and Bytes
- Using the normal distribution, determine what the re-order point should be. In other words, how many HP laser printers should he have in stock when he re-orders from the manufacturer? Show your work.