Day 2 - exercise 3 page 3 (probablity and Frequecy)

Financial Factors Demand Calcluation for 25000

25000 40000
1 Revenue @ $1.25 P 31250 31250
2 Opportunity Lost @$1 P 0 -15000
3 Total of 1 &2 31250 16250
4 Probablity 10% 30%
5 EV of 1&2 3125 4875
6 Total EV 6500
7 Printing cost @$ 0.25 D 6250
Profit 250

Financial Factors Demand Calcluation for 40000

25000 40000
1 Revenue @ $1.25 P 31250 50000
2 Opportunity Lost @$1 P 0 0
3 Total of 1 &2 31250 50000
4 Probablity 10% 30%
5 EV of 1&2 3125 15000
6 Total EV 36875
7 Printing cost @$ 0.25 D 10000
Profit 26875

Financial Factors Demand Calcluation for 55000

25000 40000
1 Revenue @ $1.25 P 31250 50000
2 Opportunity Lost @$1 P 0 0
3 Total of 1 &2 31250 50000
4 Probablity 10% 30%
5 EV of 1&2 3125 15000
6 Total EV 57125
7 Printing cost @$ 0.25 D 13750
Profit 43375

Financial Factors Demand Calcluation for 70000

25000 40000
1 Revenue @ $1.25 P 31250 50000
2 Opportunity Lost @$1 P 0 0
3 Total of 1 &2 31250 50000
4 Probablity 10% 30%
5 EV of 1&2 3125 15000
6 Total EV 62188
7 Printing cost @$ 0.25 D 17500
Profit 44688

# SULZER CONFIDENTIAL
Calcluation for 25000 Summary Sheet
55000 70000 Options
31250 31250 Print 25000 Program copies $250
-30000 -45000 Print 40000 Program copies $26,875
1250 -13750 Print 55000 Program copies $43,375
45% 15% Print 70000 Program copies $44,688
562.5 -2062.5

Ratio of Opportuniuty cost / Printing cost 1.00/0.25 4

Calcluation for 40000

55000 70000
50000 50000
-15000 -30000
35000 20000
45% 15%
15750 3000

Calcluation for 55000

55000 70000
68750 68750
0 -15000
68750 53750
45% 15%
30938 8063

Calcluation for 70000

55000 70000
68750 87500
0 0
68750 87500
45% 15%
30938 13125

# SULZER CONFIDENTIAL
Probablity and Frequency Distribution
Exercise 4 Obective - Maximise profit i.e R-C
Demand for last minute travellers
Options - sell all 3 tickets now
Factors 0 1 2 3
1 Revenue from $475 tickets (last minute tkts) P 0 0 0 0
2 Loss of the unsold seat @ $250 P 0 0 0 0
3 Opportunity cost of Premium @ $225 P 0 -225 -450 -675
4 Goodwill Lostt @ $150 P 0 -150 -300 -450
5 Total of EV 1 to 4 0 -375 -750 -1125
6 Probablity 45% 30% 15% 10%
7 EV 0 -113 -113 -113
8 Total of EV -338
9 Revenue from sale of tickets now@ $250 750
10 Total Profit 413

Options - sell 2 tickets now

Factors 0 1 2 3
1 Revenue from $475 tickets (last minute tkts) P 0 475 475 475
2 Loss of the unsold seat @ $250 P -250 0 0 0
3 Opportunity cost of Premium @ $225 P 0 0 -225 -450
4 Goodwill Lostt @ $150 P 0 0 -150 -300
5 Total of EV 1 to 4 -250 475 100 -275
6 Probablity 45% 30% 15% 10%
7 EV -113 143 15 -28
8 Total of EV 18
9 Revenue from sale of tickets now@ $250 500
10 Total Profit 518

Options - sell 1 tickets now

Factors 0 1 2 3
1 Revenue from $475 tickets (last minute tkts) P 0 475 950 950
2 Loss of the unsold seat @ $250 P -500 -250 0 0
3 Opportunity cost of Premium @ $225 P 0 0 0 -225
4 Goodwill Lostt @ $150 P 0 0 0 -150
5 Total of EV 1 to 4 -500 225 950 575
6 Probablity 45% 30% 15% 10%
7 EV -225 68 143 58
8 Total of EV 43
9 Revenue from sale of tickets now@ $250 250
10 Total Profit 293

Options - sell 0 tickets now

Factors 0 1 2 3
 1 Revenue from $475 tickets (last minute tkts) P 0 475 950 1425
2 Loss of the unsold seat @ $250 P -750 -500 -250 0
3 Opportunity cost of Premium @ $225 P 0 0 0 0
4 Goodwill Lostt @ $150 P 0 0 0 0
5 Total of EV 1 to 4 -750 -25 700 1425
6 Probablity 45% 30% 15% 10%
7 EV -338 -8 105 143
8 Total of EV -98
9 Revenue from sale of tickets now@ $250 0
10 Total Profit -97.5
 Summary
Options
Release 3 tickets for sale now 412.5
Release 2 tickets for sale now 517.5
Release 1 tickets for sale now 292.5
Release0 tickets for sale now -97.5

Ratio ( Premium+goodwill )/(Revenue from std tkt sale)

(225+150)/250
1.5
a)
Possible Score Probablity EV
0 55% 0
1 25% 0.25
2 20% 0.4
EV = 0.65

b) Probablity of 0,1 = ? 0.25

c)Probablityof 1,2 = ? 0.65

d) To foul or not
Ev 0.65
YES = 0.65(~1) if fouled he can score 1 basket
NO = 2 if not fouled chances of scoring 2 basket
Exercise 3

D 800 units / month 9600/ year

S $ 28/order IHC = EOQ/2 x H
H 35% of $10 / crate/year IOC = D/EOQ xS
$ 3.5 / crate/year

Current system - Monthly ordering

TC IOC+IHC
(12*28)+{ (800+0)/2x % 3.5}
$336+$1400
$1,736

EOQ System

EOQ Sq Rt of (2DS/H)
392

No. of orders per yea(9600/392)

24
if order /y 24 Revised EOQ 400 Savings 1736-1372
25 Revised EOQ 384 $364
if 24 orders, TC IOC+IHC
(24x$28)+(200x$3.50)
$1,372

if 25 orders, TC IOC+IHC
(25x$28)+(192x$3.50)
$1,372
21%
Exercise 4

D 30 units/day 30*365 10950 / units/year

H 10/unit/year

S 8520

EOQ 184740.594
430

Order per year 10950/430

25.47

Orders / year 25
Revised EOQ 10950/25
438

Lead time 21 days

Consumption rate 30/day
Re ordering plan (RoP) 30x21 630 units

EOQ > RoP