QUESTION 12 Black White, a manufacturer of videogames CDs, the managers are trying to select a single supplier for one o

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Question 12 Black White A Manufacturer Of Videogames Cds The Managers Are Trying To Select A Single Supplier For One O 1 (136.52 KiB) Viewed 16 times

QUESTION 12 Black White, a manufacturer of videogames CDs, the managers are trying to select a single supplier for one of the raw materials that they are going to use in their product. The CDs consist of three layers of materials. The first one of them is a base layer made of polycarbonate plastic. After that layer, a thin layer of aluminum coating over the polycarbonate plastic. The last one is a clear protective acrylic coating over the aluminum layer. There are two companies that could provide the required materials, which are Sinuiju and JVC. Sinuiju has a solid reputation for its products and charges a higher price on account of its reliability of supply and delivery. Sinuiju dedicates plant capacity to each of its customers, and therefore supply is assured. This allows Sinuiju to charge $1.20 for the raw materials used in the CDs. JVC is a small raw materials supplier that has limited capacity but charges only $0.90 for a unit's worth of raw materials. Its reliability of supply, however, is in question. JVC does not have enough capacity to supply all its customers all the time. This means that orders to JVC are not guaranteed. In a year of high demand for raw materials, JVC will have 90,000 units available for Black White. In low-demand years, all products will be delivered. If Black White does not get raw materials from suppliers, it needs to buy them on the spot market to supply its customers. Black White relies on one major videogames producer for most of its business. Failing to deliver could lead to losing this contract, essentially putting the firm at risk. Therefore, BlackWhite will buy raw material on the spot market to make up for any shortfall. Spot prices for single-lot purchases (such as BlackWhite would need) are $2.00 when raw materials demand is low and $4.00 when demand is high. Demand in the raw materials market has a (last two digits of your student ID number) percent chance of being high each of the next two years. Black White sold (your student ID number) CDs last year and expects to sell 10 percent more this year. However, there is a (subtract a hundred from the last two digits of your student ID number) percent chance it will sell only (your student ID number). Next year, the demand has a (subtract a hundred from the last two digits of your student ID number) percent chance of rising 20 percent over this year and a (last two digits of your student ID number) percent chance of falling 10 percent. BlackWhite uses a discount rate of 20 percent. Assume all costs are incurred at the beginning of each year (Year 1 costs are incurred now, and Year 2 costs are incurred in a year) and that BlackWhite must make a decision with a two-year horizon. Only one supplier can be chosen, as these two suppliers refuse to supply someone who works with their competitor. Based on the demand and its probability at the end of the second year, can you help the managers to choose between these two suppliers?