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 ​$16,000 per​ year, how many suppliers should Witt Input Devices​ use? Assume that up to three nearly identical local suppliers are available. Find the EMV for alternatives using​ 1, 2, or 3 suppliers.

Practical Management Science
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ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
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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
​$16,000
per​ year, how many suppliers should Witt Input Devices​ use? Assume that up to three nearly identical local suppliers are available.
Find the EMV for alternatives using​ 1, 2, or 3 suppliers.
 
 
​EMV(1)=​$54,40054,400
​(Enter your response rounded to the nearest whole​ number.)
​EMV(2)=​ ? $
​(Enter your response rounded to the nearest whole​ number.)
​EMV(3)=​ ? $
​(Enter your response rounded to the nearest whole​ number.)
 
Based on the EMV value the best choice is to use _____ ?
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