Phillip Witt, president of Witt Input Devices, wishes to create a portfolio of local suppliers for his new line of keyboards. As the suppliers all reside in a location prone to hurricanes, tornadoes, flooding, and earthquakes, Phillip believes that the probability in any year of a "super-event" that might shut down all suppliers at the same time at least 2 weeks is 3%. Such a total shutdown would cost the company approximately $480,000. He estimates the "unique-event" risk for any of the suppliers to be 5%. Assuming that the marginal cost of managing an additional supplier is $14,800 per year, how many suppliers should Witt Input Devices use? Assume that up to three nearly identical local suppliers are available. Part 2 Find the EMV for alternatives using 1, 2, or 3 suppliers. EMV(1)=$ (Enter your response rounded to the nearest whole number.) Part 3 EMV(2)=$ (Enter your response rounded to the nearest whole number.) Part 4 EMV(3)=$ (Enter your response rounded to the nearest whole number.) Part 5 Based on the the EMV value, the best choice is to use ▼ one supplier two suppliers three suppliers

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Part 1

Phillip Witt, president of Witt Input Devices, wishes to create a portfolio of local suppliers for his new line of keyboards. As the suppliers all reside in a location prone to hurricanes, tornadoes, flooding, and earthquakes, Phillip believes that the probability in any year of a "super-event" that might shut down all suppliers at the same time at least 2 weeks is

3%.

Such a total shutdown would cost the company approximately

$480,000.

He estimates the "unique-event" risk for any of the suppliers to be

5%.

Assuming that the marginal cost of managing an additional supplier is

$14,800

per year, how many suppliers should Witt Input Devices use? Assume that up to three nearly identical local suppliers are available.

Part 2

Find the EMV for alternatives using 1, 2, or 3 suppliers.

EMV(1)=$________

(Enter your response rounded to the nearest whole number.)

Part 3

EMV(2)=$________

(Enter your response rounded to the nearest whole number.)

Part 4

EMV(3)=$________

(Enter your response rounded to the nearest whole number.)

Part 5

Based on the the EMV value, the best choice is to use

▼

one supplier

two suppliers

three suppliers

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