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aksik [14]
3 years ago
10

Phillip​ Witt, president of Witt Input​ Devices, wishes to create a portfolio of local suppliers for his new line of keyboards.

As the suppliers all reside in a location prone to​ hurricanes, tornadoes,​ flooding, and​ earthquakes, Phillip believes that the probability in any year of a​ "super-event" that might shut down all suppliers at the same time at least 2 weeks is 3​%. Such a total shutdown would cost the company approximately ​$480 comma 000. He estimates the​ "unique-event" risk for any of the suppliers to be 5​%. Assuming that the marginal cost of managing an additional supplier is ​$14 comma 800 per​ year, how many suppliers should Witt Input Devices​ use? Assume that up to three nearly identical local suppliers are available.
Business
1 answer:
kirill115 [55]3 years ago
6 0

Answer:

Based on the EMV value, the best choice is to use Two suppliers

Explanation:

Is necessary to consider different amount of suppliers and evaluate the cost. We will choose the number of suppliers which offers a lower cost.

  • EMV1 = cost of shutdown*super event risk + cost of shutdown*unique event risk + cost of managing supplier = 480000*.02 + 480000*0.05+16000 = 9600 + 24000 + 16000 = $ 49600

  • EMV2 = cost of shutdown*super event risk + cost of shutdown*unique event risk of each supplier*unique event risk of each supplier + cost of managing 2 suppliers = 480000*.02 + 480000*0.05*.05+16000*2 = 9600 + 1200 + 16000*2 = $ 42800

  • EMV3 = cost of shutdown*super event risk + cost of managing 3 suppliers = 480000*.02 + 480000*0.05*.05+16000*2 = 9600 + 16000*3 = $ 57600

Based on the EMV value, the best choice is to use Two suppliers

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Answer:

$68,760  

Explanation:

The computation of the payroll expense is shown below:

FICA taxes ($960,000 - $180,000) × (7.65% - 1.45%) $48,360

Medicare ($960,000 × 1.45%)                                       $13,920

State unemployment tax {($960,000 - $600,000) × 1%}  $3,600

Federal unemployment tax {($960,000 - $600,000) × 0.80%} $2,880

Total                                                                                  $68,760  

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Answer:

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