# HW #2 - Chris Martin BUAD 311 Tue/Thur 2:00 pm Homework#2 1...

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\$6 million \$9 million Demand Realization High (.4) \$12 Million Low (.6) \$10 Million High (.4) \$14 Million Low (.6) \$10 Million Chris Martin BUAD 311 Tue/Thur 2:00 pm Homework #2 1. 1.5 customers per minute 2. A) 9 months B) If the company raises the wages of its 27 employees, it will be facing a yearly cost of \$14,580 just from the increase in wages. Additionally, the company will also be forced to train new employees since, on average, employees will be leaving at a rate of 2.25/month (throughput rate = 27/12 = 2.25), which generates an average yearly cost of \$6345 (2.25 x 12 x 235). So, by raising wages, the company will be facing a grand total of \$20,925 in employee wages and training costs, compared to the \$8,460 it will face by hiring 3 new employees every month and no additional costs from increasing wages. Therefore, the total the company
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Unformatted text preview: will LOSE by raising wages is \$20,925 - \$8,460 = 12,465. 3. A) 4.5 minutes B) The Cashier is busy 80% of the time and the coffee makers are busy 83.3% of the time. 4. Factory Choice-\$6 mil + (\$12mil)(.4)= -\$1.2 million-\$6 mil + (\$10mil)(.6)= \$0-\$9 mil + (\$14mil)(.4)= -\$3.4 million-\$9 mil + (\$10mil)(.6)= -\$3 million Ideally, the company should reframe from constructing a new factory because the risk associated with the unfavorable probability of demand shows potential for an enormous loss on the company’s part. However, if the company chooses to build, it should build the smaller factory, because in the best case scenario, they will break even and in the worse case scenario they will lose only \$1.2 million as opposed to losses that are roughly 3 times that amount facing the larger facility....
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• Summer '07
• Vaitsos
• Management, Million, \$0, Yearly Cost, \$14,580

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