The company should consider the medium recovery demand level, which has 50 % probability for the next year. The company should order the stock at 105000 demand level because the chances are higher than other demand levels. The pessimistic approach can bring negative consequences such as if the company order the stock at low level and but the economy recovers quickly, then there will be difficulty in buying again the stocks. Either there will be shortage or the prices will increase when the sudden demand will increase. Similarly, optimistic approach will bring hard time to company. If the company buys large number of stock, but the economy does not recover, the stock will become expense for the company and it will be difficult to sell products without much demand from the public. Therefore the company should focus the middle level of demand in order to operate efficiently.
The company has negotiated their main supply to decrease the cost of stocks from $280 to $190. The company can save good amount of money by taking advantage of this negotiate and order the stocks.
Question 2
In this question we will be answering how the furniture manufacturer can maximize its profits and which products he should focus more in order to reach its higher profit point. For this task we have used excel solver (Linear Programming technique). Following are the constraints that will be used in order to determine the order quantity resource placement to achieve high profit.
Following are the results that were achieved when we implemented these constraints:
Square
Round
Rectangular
Elliptic
RHS
Dual
Maximize
3500
3000
1500
2000
Wood
0
11
0
12
<=
52000
0
Metal
7
0
8
0
<=
36000
0
Other Materials
6
4
9
8
<=
48500
488.0952
Labor
1.5
2.75
2
3.5
<=
20000
380.9524
Solution->
5083.333
4500
0
0
31291670
The above table states that the company should focus on the square and round tables as there is more demand for this product. Also these tables are providing more profit to the company. If they will make 5083.333 round table and 4500 of round tables they will earn a profit of $ 31,291,670. They should focus on these products and use their resources for the production of these products. All the formulations of the strategy is present in Appendix A.
Question 3
Total exposure on Alan's Salary= £52,000*2.5= £130,000
Total exposure on Karen's Salary= £38,500*2.5= £96250
The total exposure on individual basis is calculated to be= £130,000+£96,250= £226,250
If both of these individuals open up a bank account and jointly deposit their salary into one account then their exposure can be increased as illustrated below:
(£52,000+£38,500)*3.25= £294,125
Thus the maximum exposure (borrowing) is calculated to be £ 294,125
Keeping in mind their financial position, I would recommend them to borrow the minimum amount of exposure that is applicable on their individual salary. This is because, looking at their financial positions, the per month salary of Alan 4334 and Karen is 3208 which is comparatively low to have a stable ...