Phillip Witt, president of Witt Input Devices, wishes to create a portfolio of local suppliers for his new line of keyboards. Suppose that Phillip is willing to use one local supplier and up to two more located in other territories within the country. This would reduce the probability of a "super-event" that might shut down all suppliers at the same time at least 2 weeks to 0.6%, but due to increased distance the annual costs for managing each of the distant suppliers would be $24,500 (still $16,000 for the local supplier). A total shutdown would cost the company approximately $380,000. He estimates the "unique-event" risk for any of the suppliers to be 4%. Assuming that the local supplier would be the first one chosen, how many suppliers should Witt Input Devices use? Find the EMV for alternatives using 1, 2, or 3 suppliers. EMV(1) = $ 36210 (Enter your response rounded to the nearest whole number.)

Phillip Witt, president of Witt Input Devices, wishes to create a portfolio of local suppliers for his new line of keyboards. Suppose that Phillip is willing to use one local supplier and up to two more located in other territories within the country. This would reduce the probability of a "super-event" that might shut down all suppliers at the same time at least 2 weeks to 0.6%, but due to increased distance the annual costs for managing each of the distant suppliers would be $24,500 (still $16,000 for the local supplier). A total shutdown would cost the company approximately $380,000. He estimates the "unique-event" risk for any of the suppliers to be 4%. Assuming that the local supplier would be the first one chosen, how many suppliers should Witt Input Devices use? Find the EMV for alternatives using 1, 2, or 3 suppliers. EMV(1) = $ 36210 (Enter your response rounded to the nearest whole number.)

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter8: Cost Analysis

Section: Chapter Questions

Problem 2.3CE

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Question

Phillip Witt, president of Witt Input Devices, wishes to create a portfolio of local suppliers for his new line of keyboards. Suppose that
Phillip is willing to use one local supplier and up to two more located in other territories within the country. This would reduce the
probability of a "super-event" that might shut down all suppliers at the same time at least 2 weeks to 0.6%, but due to increased distance
the annual costs for managing each of the distant suppliers would be $24,500 (still $16,000 for the local supplier). A total shutdown
would cost the company approximately $380,000. He estimates the "unique-event" risk for any of the suppliers to be 4%. Assuming that
the local supplier would be the first one chosen, how many suppliers should Witt Input Devices use?
Find the EMV for alternatives using 1, 2, or 3 suppliers.
EMV(1) = $ 36210 (Enter your response rounded to the nearest whole number.)

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