Homework__2

Homework__2 - Management Science & Engineering 369 Homework...

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Spring, 2008 Homework #2 Due: Beginning of class, April 22 1. Forward contracts and asset-liability matching a) Company A must first invest in capacity and then purchase long lead time materials in order to produce its products. If the company sells a commodity product, explain why the company must use forward contracts with its customers to ensure its profitability. b) To manufacture its product, company B purchases commodity materials at fluctuating market prices and pays a contract manufacturer a negotiated fee per unit to assemble its products from them. If the company does not enter into forward contracts with its customers, describe how it must price its products in order to maintain a constant gross margin. 2. Can insights gained from Dell’s BTO model be leveraged in its corporate PC business? In class we discussed how Dell’s BTO model improved supply-demand matching in the short term “spot” market for components such as DRAM, hard drives and LCD screens. We also discussed how Dell’s failure to enter into forward contracts for the components it
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This note was uploaded on 06/16/2010 for the course MS&E 369 taught by Professor Blakejohnson during the Spring '08 term at Stanford.

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Homework__2 - Management Science & Engineering 369 Homework...

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