1. Use the sales forecaster’s predication to describe a normal probability distribution that can be used to approximate the demand distribution. Sketch the distribution and show its mean and standard deviation.

Let's assume that the expected sales distribution is normally distributed, with a mean of 20,000, and 95% falling within 10,000 and 20,000.

We know that +/- 1.96 standard deviations from the mean will contain 95% of the values. So, we can get the standard deviation by:

z = (x - mu)/sigma = 1.96
sigma = (x - mu)/z

Sigma = (30,000-20,000) / 1.96 = 5,102 units.

So, we have a distribution with a mean of 20,000 and a standard deviation of 5,102.

2. Compute the probability of a stock-out for the order quantities suggested by members of the management team.

Using the normal distribution theory, we discover that as the ordered quantity increases the probability of stockout decreases.

At 15,000 the probability of stockout will be 0.8365
At 18,000 the probability of stockout will be 0.6517
At 24,000 the probability of stockout will be 0.2177
At 28,000 the probability of stockout will be 0.0582

3. Compute the projected profit for the order quantities suggested by the management team under three scenarios: worst case in which sales = 10,000 units, most likely case in which sales = 20,000 units and best case in which sales = 30,000 units:

Order Quantity: 15,000 were cost price is $16, selling price $24 & after holiday selling price $5 |Unit Sales |Profit |
|10,000 |25,000 |
|20,000 |120,000 |
|30,000 |120,000 |

Order Quantity: 18,000 were cost price is $16, selling price $24 & after holiday selling price $5 |Unit Sales |Profit |
|10,000 |-8,000 |
|20,000 |144,000 |
|30,000...

...Solution to Case Problem SpecialtyToys
10/24/2012
I. Introduction:
The SpecialtyToys Company faces a challenge of deciding how many units of a new toy should be purchased to meet anticipated sales demand. If too few are purchased, sales will be lost; if too many are purchased, profits will be reduced because of low prices realized in clearance sales. Here, I will help to analyze an appropriate order quantity for the company.
II. Data Analysis:
1.
20,0
00
.025
10,0
00
30,0
00
.025
.95
20,0
00
.025
10,0
00
30,0
00
.025
.95
Since the expected demand is 2000, thus, the mean µ is 2000. Through Excel, we get the z value given a 95% probability is 1.96. Thus, we have: z= (x-µ)/ σ=(30000-20000)/ σ=1.96, so we get the standard deviation σ=(30000-20000)/1.96=5102.
The sketch of distribution is above. 95.4% of the values of a normal random variable are within plus or minus two standard deviations of its mean.
2. At order quantity of 15,000, z= (15000-20000)/5102=-0.98,
P(stockout) = 0.3365 + 0.5 = 0.8365
At order quantity of 18,000, z= (18000-20000)/5102=-0.39,
P(stockout) = 0.1517 + 0.5= 0.6517
At order quantity of 24,000, z= (24000-20000)/5102=0.78,
P (stockout) = 0.5 - 0.2823 = 0.2177
At order quantity of 28,000, z= (28000-20000)/5102=1.57,
P (stockout) = 0.5 - 0.4418 = 0.0582
3.
Order Quantity = 15,000 |
Unit Sales | Total...

... Case 13: Southeastern Specialty, Inc.
Financial Risk (1, 2, 3, 4, & 6)
1. Is the return on the one-year T-bill risk free?
No, the return on the one-year T-bill is not risk free. Financial risk is related to the probability of earning a return less than expected and the larger the chance of earning a return far below that expected, the greater the amount of financial risk. Risk free assumes 100% probability that the investment will earn the total percent of return that is expected.
2. Calculate the expected rate of return on each of the five investment alternatives listed in Exhibit 13.1. Based solely on expected returns, which of the potential investments appear best?
Based on the expected returns, the potential investment that appears the best is 15% with S & P 500 Fund.
(Probability of Return 1 x Return 1) + (Probability of Return 2 x Rate 2) = Expected Rate of Return
1-Year T-Bill
(0.10 x .07) + (0.20 x .07) + (0.40 x .07) + (0.20 x .07) + (0.10 x .07) = .07 = 7%
Project A
(0.10 x [-.08]) + (0.20 x .02) + (0.40 x .14) + (0.20 x .25) + (0.10 x .33) = .135 = 13.5%
Project B
(0.10 x .18) + (0.20 x .23) + (0.40 x .07) + (0.20 x [-.03]) + (0.10 x .02) = .088 = 8.8%
S & P 500 Fund
(0.10 x [-.15]) + (0.20 x 0) + (0.40 x .15) + (0.20 x .30) + (0.10 x .45) = .15 = 15%
Equity in SSI
(0.10 x 0) + (0.20 x .05) + (0.40 x .10) + (0.20 x .15) + (0.10 x .20) = .10 = 10%
3. Now calculate the standard deviations and coefficients of...

...1. Let X be the demand for the toy. Then X follows normal distribution with mean μ = 20000 and standard deviation σ. Then
P(10000 < X < 30000) = 0.95
P( X < 20000)=0.5
P(10000 < X < 20000) = 0.475
P( X < 10000)=0.025
NORM.S.INV(0.025)=-1.96
NORM.S.INV(0.975)=1.96
Z-score of 10000 =-1.96
Z-score of 30000=1.96
σ = (30000-20000)/1.96 =10000/1.96 = 5102
Standard Deviation of 5102
The graph above shows the distribution for the demand for the Weather Teddy Bear usingSpecialtyToys’ forecasts based off of sales histories for similar products. This forecast predicts that this toy will have a demand of 20,000 units. However, the forecasts also predict that the probability of selling between 10,000 to 30,000 units is equal to 0.95. Using this information, the forecast suggests a mean sale of 20,000 units with a range of 10,000 to 30,000 units. Using the normal standard inverse function in excel, the standard deviation for this forecast is calculated to be 5,102 units. Using 20,000 units as the given mean, this additional information can be used to generate the graph showing 14,898 and 25,102 units within one standard deviation of the mean, and 9,796 and 30,204 units within 2 standard deviations of the mean. 9,796 and 30,204 are outside of the 0.95 probabilty range.
2.
Order (X)
z-score=(X-20000)/5102
P(X)
Stock out=P(1-X)
15000
-0.980
0.164
0.836
18000
-0.392
0.348
0.652
24000
0.784
0.783
0.217
28000
1.568
0.942...

...IRR of the project.
We are assuming that all cash flows take place at the end of the year, we end year 0 by a cash outflow of 1,050,000, year 1 we have an inflow of , year two we have an inflow of , and year three an inflow of . It takes 2.1 years in order to recover the initial investment, payback period equals 2.1 years.
As a rule we accept any project with a net present value greater than 0. The NPV takes into consideration the cost of financing by discounting the cash flows by the weighted average cost of capital which leads to good decisions. In the case of Dinky Company the NPV was $304,976.61 so the project should be accepted.
The internal rate of return is an alternative to the NPV method. This method is internal to the project, and only relies on the cash flows of the project. In our case we would compare the IRR of to our WACC of 13.3%. Our IRR is significantly higher so we should accept the project based on the Internal Rate of Return method.
Question 4: Should the capital-budgeting committee accept the proposed project? Discuss.
Since the project passes the payback period test, the Internal rate of return test, and the NPV test it should be accepted by the committee....

...Principal of Management
CaseStudy: Toys Galore
The CaseToys Galore is a major manufacturer of toys which faces uncertainty about demand for its toys during the Christmas season. If there is a high demand for toys, and if Toys Galore:
* Is fully able to meet this demand, then it makes additional revenue of $4m.
* Is partly able to meet this demand, then it makes additional revenue of $3m
* Is able only to supply at a low level, then it makes no additional revenue.
If, however, there is low demand, then it makes no additional revenue. In July, Toys Galore has the option of expanding production. An expansion will cost $2m. If it expands in July, then it will be fully able to meet a high demand at Christmas. If it decides not to expand production in July, then it has another chance to expand in October. An expansion in October also costs $2m, but this late expansion does not leave the company sufficient time to fully meet high demand at Christmas; it can only partly meet any high demand.
In October, however, the ABS announces the latest national income figures.Past experience suggests that income figures are high half the time and low half the time. Past experience also suggests that if there is a high national income figure, then there is a 80% probability of high demand, and if a low national income...

...
CASESTUDY NO.1
Mary Roberts had been with the company three years when she was promoted to manager of the tax department which was part of the controller’s division.Within four months she became a supervisor of ten staff accountants to fill a vacancy.Her superior believed her to be most qualified individual to fill the position.
Many senior employees resent her that she so young to fill the position and what made them more upsets was the fact tax managers did not discuss the promotion.
QUESTION:
1.What can Mary Roberts do about the resentful senior employees?
Mary should tackle this head on she should be direct and assertive about her expectation and when people are crossing the line that means she need to be clear with people when their behavior doesn’t meet her standards and she need to be willing To set and enforce consequence if it doesn’t change
2. Can higher management do anything to help Roberts make the transitions to greater responsibility?
Yes, because they are the one who put her in that position of course they will help Mary interms of guiding it `.
3. Will her lack of technical knowledge hinder Mary’s managerial effectiveness?
No , because lacking on some aspects on technical knowledge cant bankrupt or destroy a company as long she have a guts to face and accepts failures
4. Should Mary’s superior have discussed the promotion with the senior employees before announcing it?
No ,because its not their obligation...

...February of 1999. In the past four months, the NC design had developed
sustainability. The Bostrom alliance agreement for the truck market had been concluded. The
question about Elio's strategy for the entry into automobile still remained. Should Elio's joint
venture with Bostrom? Should it partner with a tier-one or a tier-two automotive supplier?
Was Elio's technology strategy aligned with the requirements for a successful entry into the
automotive market? Paul and Hari realized that they needed answers to these questions in
the coming days.
This casestudy discusses the start-up, origins and strategic options facing an innovative set up
and start up in automotive market and in the seat design. With the domination of the
incumbent large suppliers serving the top 3 leading tier-one automakers of U.S.,
Elio
Engineering faces several challenges as it seeks to introduce its new seating technology to the
market. The case can serve as vehicle to discuss important themes such as technology and
business strategy, invention and innovation, bringing technology to market and profiting from
innovation.
Elio's should make a joint venture with Bostrom. Elio's has made a seat design naming "No
Compromise" with progress on cost, weight and performance compared to the conventional
design and also the existing all-belt-to-seat (ABTS). After many functional prototypes and
computer aided structural analysis, a perfect design...

...Introduction
In this case we get an entire scenario about how the Japan deflation set in, what were the effects of the deflation on the economy as well as on the people of Japan. It also mentions about the various reasons because of which Japan was in such a tight grip of Deflation, Depression, Demographics and Debts Guides us through the steps taken by the government in order to curb this deflation. Imparts a great knowledge to us about the various economic terms like deflation, self-liquidating credit, Non-Self Liquidating Credit and how the people and economy of a country is affected by these.
Free markets economies are subject to cycles. Economic cycles consist of fluctuating periods of economic expansion and contraction as measured by a nation's gross domestic product (GDP). The length of economic cycles (periods of expansion vs. contraction) can vary greatly. The traditional measure of an economic recession is two or more consecutive quarters of falling gross domestic product. There are also economic depressions, which are extended periods of economic contraction such as the Great Depression of the 1930s.
From 1991 through 2001, Japan experienced a period of economic stagnation and price deflation known as "Japan's Lost Decade." While the Japanese economy outgrew this period, it did so at a pace that was much slower than other industrialized nations. During this period, the Japanese economy suffered from both a credit crunch and a liquidity trap....