1- A manufacturing company manufactures T-Shirts. The fixed cost for a year is 8
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Question
1- A manufacturing company manufactures T-Shirts. The fixed cost for a year is 8100 SAR. Each T-Shirt carries on average a variable cost of 30 SAR and the selling price of 120 SAR.
a. Determine the number of T-Shirts that the company must sell to reach its break-even point.
b. What will be its profit if Company sells 120 T-Shirt per year?
2- The following payoff table provides profits based on various possible decision alternatives and various levels of demand.
States of Nature
Demand
Alternatives
Low
Medium
High
Alternative 1
50
80
130
Alternative 2
60
70
80
What decision would be taken using Maximax method?
What decision would be taken using Maximin method?
What decision would be taken using equally likely method?
3. From the following payoff table
State of nature
Action
1
2
3
A
10
200
300
B
50
100
500
Probability
0.8
0.1
0.1
a. Compute the expected opportunity loss (EOL) for actions A and B.
b. What decision will you take based on Minimax opportunity loss method?
c. What will be the expected Value for perfect information?
4. Following table represents the sales data from January to April for certain company:
Month
Automobile Battery Sales
January
28
February
21
March
39
April
34
a. Use 2 period moving averages to forecast the automobile batteries sales for march through April
b. Find MAD (Mean Absolute Deviation)
5. Given an actual demand of 125 for current period when forecast of 129 was anticipated.
a. What is forecast error for current period?
b. For given alpha of 0.5 what would the forecast for the next period by using simple exponential smoothing?
States of Nature
Demand
Alternatives
Low
Medium
High
Alternative 1
50
80
130
Alternative 2
60
70
80
Explanation / Answer
1- A manufacturing company manufactures T-Shirts. The fixed cost for a year is 8100 SAR. Each T-Shirt carries on average a variable cost of 30 SAR and the selling price of 120 SAR.
a. Determine the number of T-Shirts that the company must sell to reach its break-even point.
Answer : Let say number of units = X
so Revenue = selling price * Number of units = 120X
Cost(C) = 8100 + 30 X
At break even
Sales = COst
8100 + 30 X = 120 X
90 X = 8100
X = 90
b. What will be its profit if Company sells 120 T-Shirt per year?
Profit( When sells 120 T- shirt) = 120 * 120 - (8100 + 30 * 120) = 2700 SAR
Question 2
a. MAXIMAX method:
For alternative 1 MAX value = 130 for High Demand
For Alternative 2 MAX value = 80 for high demand
so we will go for Alternative 1 as it has maximum maximum value
b. MAXIMIN method
For alternative 1 MIN value = 50 for Low Demand
For Alternative 2 MAX value = 60 for LOw demand
so we will go for Alternative 2 as it has maximum minimum value
c. equally likely method
For ALternative one Expected Demand = (50 + 80 + 130)/3 = 260/3
For ALternative two Expected Demand = (60 + 70 + 80)/3 = 210/3 = 70
so we will go for alternative one as it has more expected deman
Question 4
Forecast for march = 24.5
Forecast for April = 30
MAD = (14 .5 + 4)/2 = 9.25
Queston 5
(a) Forecast error = 125 - 129 = -4
b. Forecast for next period = 0.5 * yt-1 + 0.5 * Ft-1 = 0.5 * (125 + 129) = 127
Month Sales Forecast Deviation january 28 february 21 march 39 24.5 14.5 april 34 30 4 Averagae 9.25Related Questions
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