Question

Problem 1: Macys orders coats from its supplier. The production cost for the supplier is 20 dollars. Currently, Macys orders from the supplier at 50 dollar per coat. Macys sells the coats to end- customers at $100 per coat. Assume the salvage value of the coat is zero; i.e, if Macys cannot sell the coats, the leftover inventory has zero value. The potential end-customer demand follows the table w, depending on the weather. Weather Possible demand D Probability D) Very Warm 150 Warm Cold Very cold 250 350 450 25% 25% 30% 20% a) What are the unit underage cost (Cu) and the overage cost (Co) for Macys? b) How many coats should Macys orde? c) Suppose Macys and the supplier belong to the same company (a centralized firm). What are the unit underage cost (Cu) and the overage cost (Co) for the whole company? How many coats should the company produce? Disregard c). Suppose Macys now offers a revenue sharing contract to the supplier. Macys pays 10 dollars per coat to the supplier up front (which is much lower than original purchasing cost 50 dollars). However, for each coat Macys sells to the end-consumers, Macys needs to give 50 dollars (of that $100) to the supplier. What are the unit underage cost (Cu) and the overage cost (Co) for Macys? How many coats should Macys order from the supplier? d) Problem 2: Read the Euyao Glass case. Answer the following questions: a. Based on Exhibit 16, what is the hourly labor cost of Tianjin plant in US dollar (consider only the work hours)?
Answer all question . I don’t have time . It needs to be done ASAP

Answer 1

Macys coats
Possible Demand, D	Probability	Cumulative Probability
150	0.25	0.25
250	0.25	0.5
350	0.3	0.8
450	0.2	1
supplier's production cost	$    20.00	per coat
Macy's cost	$    50.00	per coat
selling price	$ 100.00	per coat
salvage value	$           -	per coat
a) For Macys:
Underage Cost, Cu = selling price - Macys cost
Cu	$    50.00
Overage Cost, Co = Macys cost-Salvage Value
Co	$    50.00
b) Critical Ratio, C=Cu/(Cu+Co)
C	0.5
Now locate 0.5 in the cumulative probability table:
the possible demand comes to 250 coats.
hence, Macys should order 250 coats.
c) if it’s a centralized firm:
cost	$    20.00	per coat
Selling price	$ 100.00	per coat
salvage value	$           -	per coat
Cu	$    80.00
Co	$    20.00
C	0.80
Possible demand	350
no of coats the company should produce is 350
d) Macy's cost	$    10.00	per coat
Cu = cost of under-stocking/profit lost = $100 - $50 to supplier - $10 paid upfront
Cu =	$    40.00
Co=cost of overstocking = $100-$10
Co=	$    90.00
C	0.31
0.31 lies between 150 coats and 250 coats (0.25 and 0.5), but is closer to 0.25.
Hence, Macys should order 150 coats from the supplier.

formulae used:

1 Macys coats 2 Possible Demand, D 3 150 4 250 5 350 6 450 7 8 supplier's production cost 9 Macy's cost 10 selling price 11 salvage value 12 13 a) For Macys: 14 Underage Cost, Cu selling price macys cost 15 Cu 16 Overage Cost, Co Macys cost-Salvage Value 17 Co 18 19 b) Critical Ratio, C-Cu/(Cu+Co) 20 C 21 Now locate 0.5 in the cumulative probability table: 22 the possible demand comes to 250 coats. 23 hence, Macys should order 250 coats. 24 Probability 0.25 0.25 0.3 0.2 Cumulative Probability -B3 -C3+B4 -C4+B5 -C5+B6 20 50 100 0 per coat per coat per coat per coat B10-B9 -B9-B11 -B15/SUM(B15,B17)

25 c) if it's a centralized firm: 26 cost 27 Selling price 28 salvage value 29 Cu 30 Co 31 C 32 Possible demand 33 no of coats the company should produce is 350 34 35 d) Macy's cost 36 Cu cost of understocking/profit lost- $100 $50 to supplier $10 paid upfront 37 Cu- 38 Co-cost of overstocking $100-$10 39 Co 40 C 41 0.31 lies between 150 coats and 250 coats (0.25 and 0.5), but is closer to 0.25. 42 hence, Macys should order 150 coats from the supplier. 43 -B8 B10 0 -B27-B26 -B26-B28 B29/(B29+B30) -A5 per coat per coat per coat 10 per coat -100-50-10 -100-10 B37/(B37+B39)

25 c) if it's a centralized firm: 26 cost 27 Selling price 28 salvage value 29 Cu 30 Co 31 C 32 Possible demand 33 no of coats the company should produce is 350 34 35 d) Macy's cost 36 Cu cost of understocking/profit lost- $100 $50 to supplier $10 paid upfront 37 Cu- 38 Co-cost of overstocking $100-$10 39 Co 40 C 41 0.31 lies between 150 coats and 250 coats (0.25 and 0.5), but is closer to 0.25. 42 hence, Macys should order 150 coats from the supplier. 43 -B8 B10 0 -B27-B26 -B26-B28 B29/(B29+B30) -A5 per coat per coat per coat 10 per coat -100-50-10 -100-10 B37/(B37+B39)