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A Dunkin’ Donuts store in Brighton is trying to determine how many Pumpkin donuts to order from the central bakery in Lowell to cover their daily demand during Halloween weekend. The donuts sell for $0.90 and the store purchases them from the central bakery for $0.40 each. History suggests that daily demand for Pumpkin donuts during Halloween weekend at this store is about 1200, with a standard deviation of 100 (normally distributed). Unsold donuts are discarded at the end of each day.

1) What is the marginal benefit (i.e, cost of shortage)? Please provide your answer in decimal format to two decimal places and without the dollar sign (e.g., 1.15, 0.75, 0.20)

2) What is the marginal cost (i.e., cost of excess)? Please provide your answer in decimal format to two decimal places and without the dollar sign (e.g., 1.15, 0.75, 0.20)

3) What is the service level? Please provide your answer in decimal format to four decimal places (e.g., 0.9975, 0.7532, 0.2045)

4) What is the z-value? Please provide your answer in decimal format to two decimal places (e.g., 1.15, 0.75, 0.20)

5) What is the optimal order quantity? (Round to the nearest integer) Please provide your answer in integer format (e.g., 1000, 1500, 2000)

 
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Pat Rowe, Vice President of University Hospital, recently attended a conference session that discussed the problems of integrating computer technology into the work practices of health care professionals. The session leader argued that implementation often fails because the staff does not receive proper training in the use of the new equipment and software. This seemed plausible to Pat. In the last year, the hospital’s senior management team had decided to purchase thousands of dollars of equipment that was supposed to “redesign the delivery of patient care.” However, the word was getting around that staff were disgruntled with the new equipment and were not using it. Upon returning to the hospital, Pat called the director of training and development, Wei Lee, to discuss the insights gained at the conference. Pat said to Wei, “I think I know why staff isn’t using the computer equipment. They didn’t receive adequate training.” Wei replied, “I seem to recall that the manufacturer did provide training, but I’m not entirely sure what was included. Do you want me to look into it?” “Yes, that’s a good idea. But I still think we need to train the employees. Why don’t you get the manufacturer in here to do some more training?”

Wei immediately called the computer equipment manufacturer and learned that ten months ago, as part of the implementation process, two design engineers had conducted numerous lectures with unit staff on how to work with the new equipment and software. These sessions were poorly attended and were conducted using a lecture and overhead format. Wei decided that the poor attendance was probably responsible for the problems, and so she asked the manufacturer to re-run the training session. This time, staff would be offered free coffee and doughnuts to encourage attendance. Staff were sent a memo from the training department encouraging them to attend one of the sessions. Unit managers, who were not invited to attend the training, were asked to mention the sessions in staff meetings and highlight the free coffee and doughnuts. Unfortunately, attendance was only marginally better.

The new training sessions were again conducted by design engineers, but this time they used a laptop computer hooked up to an overhead projector. This allowed them to walk through the various screens and options of the program with staff in a real-time simulation. At the end of the session, staff were given a manual describing the computer hardware and software. It was suggested to staff that they read the manual on their own time and consult it when they had problems. Walking out of the session, one staff member was heard saying, “Computers scare the heck out of me. I can’t possibly learn this stuff. And to top it all off, I don’t think anybody really cares if I do use this new system.”

1. What can be done to avoid this happening again in the future?

2. How could they evaluate the program more in real-time?

3. What do you think the main problem was? Why?

4. What should they do with this training program?

 
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Macrohard Corporation is a new business based out of Puerto Rico that is considering a plan to manufacture and market cellphones in Peurto Rico starting in 2022. However, before it decides to take the plunge, it needs to understand the feasibility of breaking even. Macrohard is planning to sell the cellphones to wholesalers at $25. The electronic circuitry costs $7.50, CORNING supplies the screen for $3.75, and the battery costs $1.25. Additionally, the cost of a fabrication facility is $8.5 million, and Macrohard estimates that it will need to spend $2 million on sales and marketing expenses in order to achieve its objectives, and $2 million on general and administrative expenses. Calculate the break-even volume, and explain how feasible it is for Macrohard to break even.
 
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A small grocery store sells fresh produce that it obtains daily from a local farmer. During the strawberry season, demand for fresh strawberries can be reasonably approximated using a normal distribution with a mean of 40 quarts per day and a standard deviation of 6 quarts per day. The marginal cost of fresh strawberries is $0.35 per quart. The grocer determines that the optimal order quantity is 49 quarts per day.

1) What service level does the grocer achieve at the optimal order quantity? Please provide your answer in decimal format to four decimal places (e.g., 0.9975, 0.7532, 0.2045)

2) What is the marginal benefit (i.e., cost of shortage) at the optimal order quantity? Please provide your answer in decimal format to two decimal places and without the dollar sign (e.g., 1.15, 0.75, 0.20)

 
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