Heart plus faces a cost of holding inventory

Assignment Help Business Economics

Reference no: EM131007697

To ensure that the correct size of heart valve is available for heart surgery, Heart Plus, the maker of the valves employs salespeople to place and maintain inventories at hospitals in its market. After a valve is used in surgery, Heart Plus, bills the patient’s insurance company and credits the sales person with a sale. Each sales person earns a commission based on a percentage of revenue of the sales in her territory.

Because Heart plus does not get paid until it sells its valve, it must bear the cost of holding the inventory calculated as the cost of capital (12%) times the wholesale cost of the valves placed in the hospital.

OK here is the problem:

Heart Plus faces a cost of holding inventory that is higher than its competitors. The salespeople are clearly overstocking hospitals in their territory. They have asked you to figure out how to fix the problem.

Is there any incentive to make a good decision and why?

Reference no: EM131007697

Questions Cloud

Even though most corporate bonds : Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. what is the current price of the bond?

Discrete bertrand game described in oligopoly lecture note : Consider the discrete Bertrand game described in the Oligopoly lecture notes/video. According to the rules of this game each student selects a number from the set {0,1,2, 3, 4, 5, 6, 7, 8, 9, 10} and is randomly matched with another student.

Define interest rate risk : How much would you pay today for the following coupon bond where the coupon is received once a year over the 5 year holding period. As always show all formulas, calculations and work for full credit. Define interest rate risk. Show using a numerical ..

Empirical observations-preferred habitat theory : Next, explain how this theory explains all three empirical observations(Preferred Habitat Theory). Interest rates on bonds of different maturities move together over time.

Heart plus faces a cost of holding inventory : Heart Plus faces a cost of holding inventory that is higher than its competitors. The salespeople are clearly overstocking hospitals in their territory. They have asked you to figure out how to fix the problem. Is there any incentive to make a good d..

Applying the liquidity preference model : Applying the liquidity preference model describe the following impact on interest rates: a. An open market sale by the Federal Reserve. b. Explain the effect of an open market purchase on interest rates. Make sure you discuss the liquidity effect, re..

Applying the bond market model explain completely : Applying the Bond Market Model explain completely how each of the following would influence the price of bonds and interest rates (Explain your answers using supply and demand graphs):

Correct size of heart valve is available for heart surgery : To ensure that the correct size of heart valve is available for heart surgery, Heart Plus, the maker of the valves employs salespeople to place and maintain inventories at hospitals in its market. Heart Plus faces a cost of holding inventory that is ..

Aggregate expenditures and aggregate demand and supply : Using diagrams for aggregate expenditures (AE) and aggregate demand and supply (AD-AS), show the short-run effects each of the following events has on the Canadian economy.

User Account

All Pages