Estimate how much variability from target availability

Assignment Help Financial Management
Reference no: EM132014273

Expected target availability level for items should be 95%. When the availability decreases, a penalty is incurred for example lost future sales. When the availability level decreases to 90%, the profit is reduced by 30% from the profit at the target level. Increasing the availability level and reducing the variability has significant implications on the supply chain, production and inventory-carrying costs. For every one percentage point that the availability is allowed to vary from the target level, the unit cost of supplying the item decreases by 6 cents. The price of the item is $15.95 and profit per Item sold at 95% availability is $2.

a. Estimate how much variability from the target availability percentage should be allowed. Use Taguchi LosS Function and explain each step of your calculation.

b. Explain two reasons why the cost of supplying the item decreases with every one percentage point that the availability is allowed to vary from the target level.

Reference no: EM132014273

Reviews

Write a Review

 

Financial Management Questions & Answers

  Bond is premium bond with coupon

Bond P is a premium bond with a coupon of 9.8 percent , a YTM of 8.55 percent, and 15 years to maturity.

  Corporation had cash flow from operating activities

For year ended 12/31/15, a corporation had cash flow from operating activities of $55,000, cash flow from investment activities of -$35,000, and cash flow from financing activities of -$45,000. The Statement of Cash Flows would show a…

  Nominal rate inflation rate approximate real rate

Nominal Rate Inflation Rate Approximate Real Rate True Real Rate. Estimate the default premium and the maturity premium

  Replacing their current fleet of delivery vehicles

Your company is contemplating replacing their current fleet of delivery vehicles with Nissan NV vans.

  What is the companys current stock price

The bond currently sells for $900. If the yield to maturity remains at its current rate, what will the price be 5 years from now?

  What is the annual worth of a machine with a first cost

What is the annual worth of a machine with a first cost of $112,000, an annual operating cost of $16,500 per year,

  Safety and soundness of the banking system

Is the FDIC required to "protect" something else other than just the "safety and soundness" of the banking system?

  Annual return mean and standard deviation

Tyler Trucks stock has an annual return mean and standard deviation of 14 percent and 43 percent, respectively. Michael Moped Manufacturing stock has an annual return mean and standard deviation of 10 percent and 69 percent, respectively. Your portfo..

  Change in the bonds price in dollars and percentage terms

A $1,700 face value corporate bond with a 5.6 percent coupon (paid semiannually) has 12 years left to maturity. It has had a credit rating of BBB and a yield to maturity of 7.9 percent. The firm has recently gotten into some trouble and the rating ag..

  What are the total revenues for firm

Suppose that Firm A is located at Node A, and buys 10 MW of power from Firm B, who is located at Node B. What are the total revenues for Firm B?

  How much of your earnings will be interest on interest

You deposit $10,000 in your bank account. If the bank pays 2% compound interest, how much of your earnings will be interest on interest after 10 years?

  Explain the capital budgeting techniques

explore the capital budgeting techniques covered in the unit, NPV, PI, IRR, and Payback. Compare and contrast each of the techniques with an emphasis on comparative strengths and weaknesses

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd