ADMS 4570 Lecture 2: Week 3- Personal Case analysis
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Roll and Wind Cable, Inc. (âR&Wâ) manufactures 10,000 rollsof cable each period. The cable is used as an input for producingseveral other products that R&W manufactures. For a 100 unitbatch, R&Wâs manufacturing costs are:
Direct materials | $170 |
Direct labor | 100 |
Manufacturing overhead | 275 |
Total | $545 |
Included in manufacturing overhead is $175 per batch fordepreciation expenses on production facilities and productionequipment. No other costs or expenses need to be considered.
An outside supplier has offered to sell R&W the 10,000 rollsof cable necessary to meet production needs this period for alump-sum of $45,000.
Assume that using the outside supplies will not impact thecompanyâs sales activities.
Required
1.Using the given information, evaluate and provide advice tothe company regarding accepting or rejecting the outside supplierâsoffer.
2.Using the same information, re-evaluate the outside suppliersoffer, with the additional facts:
If the company accepts the outside suppliers offer, they renttheir unused production facilities to generate $30,000 ofadditional revenue and
They will incur additional costs associated with renting theirfacilities will of: (a) $7,000 for security and (b) $5,000 forinsurance.
3.Before making a final decision, suggest at least 3qualitative, i.e. non-quantitative issues, the company shouldconsider before accepting or rejecting the suppliers offer.
I have this problem and am needing help to solve it.
Problem 11-3 Blair & Rosen, Inc. (B&R) is a brokerage firm that specializes in investment portfolios designed to meet the specific risk tolerances of its clients. A client who contacted B&R this past week has a maximum of $55,000 to invest. B&R's investment advisor decides to recommend a portfolio consisting of two investment funds: an Internet fund and a Blue Chip fund. The Internet fund has a projected annual return of 12%, while the Blue Chip fund has a projected annual return of 9%. The investment advisor requires that at most $25,000 of the client's funds should be invested in the Internet fund. B&R services include a risk rating for each investment alternative. The Internet fund, which is the more risky of the two investment alternatives, has a risk rating of 5 per thousand dollars invested. The Blue Chip fund has a risk rating of 4 per thousand dollars invested. For example, if $10,000 is invested in each of the two investment funds, B&R's risk rating for the portfolio would be 5(10) + 5(10) = 100. Finally, B&R developed a questionnaire to measure each client's risk tolerance. Based on the responses, each client is classified as a conservative, moderate, or aggressive investor. Suppose that the questionnaire results classified the current client as a moderate investor. B&R recommends that a client who is a moderate investor limit his or her portfolio to a maximum risk rating of 250. What about a risk rating of 150?
The question(s) ask the following:
(b) | Build a spreadsheet model and solve the problem using Solver. What is the recommended investment portfolio for this client? Internet Fund= Blue chip fund= Annual Return=
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