# Expansion strategy and establishing a re-order point

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PART1

**Purpose of Assignment**

This assignment has two cases. The first case is on expansion strategy. Managers constantly have to make decisions under uncertainty. This assignment gives students an opportunity to use the mean and standard deviation of probability distributions to make a decision on expansion strategy. The second case is on determining at which point a manager should re-order a printer so he or she doesn’t run out-of-stock. The second case uses normal distribution. The first case demonstrates application of statistics in finance and the second case demonstrates application of statistics in operations management.

**Assignment Steps**

**Resources: **Microsoft Excel®, Bell Computer Company Forecasts data set, Case Study Scenarios

**Write** a 1,050-word report based on the Bell Computer Company Forecasts data set and Case Study Scenarios.

**Include** answers to the following:

Case 1: Bell Computer Company

- Compute the expected value for the profit associated with the two expansion alternatives. Which decision is preferred for the objective of maximizing the expected profit?
- Compute the variation for the profit associated with the two expansion alternatives. Which decision is preferred for the objective of minimizing the risk or uncertainty?

Case 2: Kyle Bits and Bytes

- What should be the re-order point? How many HP laser printers should he have in stock when he re-orders from the manufacturer?

**Format** your assignment consistent with APA format.

PART2

SuperFun Toys Case Study

**Purpose of Assignment**

The purpose of this assignment is for students to learn how to make managerial decisions using a case study on Normal Distribution. This case uses concepts from Weeks 1 and 2. It provides students an opportunity to perform sensitivity analysis and make a decision while providing their own rationale. This assignment also shows students that statistics is rarely used by itself. It shows tight integration of statistics with product management.

**Assignment Steps**

**Resources: **Microsoft Excel®, SuperFun Toys Case Study, SuperFun Toys Case Study Data Set

**Review** the SuperFun Toys Case Study and Data Set.

**Develop** a 1,050-word case study analysis including the following:

**Use the sales forecaster’s prediction 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.
*Hint*: To find the standard deviation, think Empirical Rule covered in Week 1. - Compute the probability of a stock-out for the order quantities suggested by members of the management team (i.e. 15,000; 18,000; 24,000; 28,000).
- Compute the projected profit for the order quantities suggested by the management team under three scenarios: pessimistic in which sales are 10,000 units, most likely case in which sales are 20,000 units, and optimistic in which sales are 30,000 units.
- One of SuperFun’s managers felt the profit potential was so great the order quantity should have a 70% chance of meeting demand and only a 30% chance of any stock- outs. What quantity would be ordered under this policy, and what is the projected profit under the three sales scenarios?

**Format** your assignment consistent with APA format.