8. Groundz Coffee Shop uses 4 pounds

of a specialty tea weekly; each pound costs $16. Carrying costs are $1 per

pound per week because space is very scarce. It costs the firm $8 to prepare an

order. Assume Groundz is open 52 weeks per year and closed on Mondays. a. (5 points)How many pounds

should Groundz order at a time? b. (10 points)What is the

total annual cost of managing this item? c. (7 points)The lead time

for orders to arrive is 1.5 (work) weeks. If the standard deviation of weekly

demand is 1.2 pounds and Groundz wishes to achieve at least a 98% customer

satisfaction level what is the reorder point? d. (10 points)Groundz has

been contacted by a new supplier who is offering to sell the same tea for $12

per pound. In return Groundz can place orders only once a month. Inventory and

ordering costs would remain the same. Is it more cost-effective for Groundz to

switch suppliers? Should Groundz switch? Midterm 2 Page 5 DS 412 College

of Business SFSU Fall 2005 Theresa M. Roeder 9. (30 points)A high school

student is trying to decide what to do after high school. She could get a job

where she expects to make an average of $25000 per year over the next 10

years. She assumes she will have no problems finding a job. She can attend an

Ivy League school which will cost $30000/year for 4 years if she gets a

degree in the liberal arts or business. If she decides to major in engineering

she concludes (perhaps incorrectly) that her studies will be much more

stressful and that she should assign an extra $10000/year in costs. There is

a 50% chance that she will get into an Ivy League school. If she does not she

can either get a job immediately or go to a local state school. If she gets an

Ivy League degree she anticipates an average salary of $60000/year if she

does not get an engineering degree or $80000/year if she does. There is an

80% chance she will get such a job after she graduates. If not she can find

the type of job she would have gotten had she not gone to college. If she

attends a state school her costs will be $10000/year for liberal

arts/business and $15000/year for engineering. She assumes there is a 95%

chance she will be accepted at a state school and a 75% chance she will be

able to find a position after graduating. She anticipates average salaries of

$50000/year and $65000/year depending on her major. Assume there are no time

value of money concerns. Draw the decision tree and make recommendations on

which decisions are the most appropriate.

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# 8. Groundz Coffee Shop uses 4 pounds of a specialty tea weekly; each pound costs

Friday July 8, 2022

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