Bloom\'s Jeans is searching for new? suppliers, and Debbie? Bloom, the? owner, h
ID: 331532 • Letter: B
Question
Bloom's Jeans is searching for new? suppliers, and Debbie? Bloom, the? owner, has narrowed her choices to two sets. Debbie is very concerned about supply? disruptions, so she has chosen to use three suppliers no matter what. For option? 1, the suppliers are? well-established and located in the same country. Debbie calculates the? "unique-event" risk for each of them to be 5?%. She estimates the probability of a nationwide event that would knock out all three suppliers to be 2.7?%. For option? 2, the suppliers are newer but located in three different countries. Debbie calculates the? "unique-event" risk for each of them to be 21?%. She estimates the? "super-event" probability that would knock out all three of these suppliers to be 0.5?%. Purchasing and transportation costs would be ?$900,000 per year using option 1 and ?$910 comma 000 per year using option 2. A total disruption would create an annualized loss of ?$520,000.
?a) What is the probability that all three suppliers will be disrupted using option 1? (round your response to five decimal? places).
?b) What is the probability that all three suppliers will be disrupted using option 2? (round your response to five decimal? places).
?c) What is the total annual purchasing and transportation cost plus expected annualized disruption cost for option 1? ?(round your response to the nearest whole? number).
?d) What is the total annual purchasing and transportation cost plus expected annualized disruption cost for option 2? ?(round your response to the nearest whole? number).
?e) Based on the total annual purchasing and transportation cost plus expected annualized disruption? cost, which option seems best?
Explanation / Answer
Question:- What is the probability that all three suppliers will be disrupted using option 1?
The probability of all the three suppliers getting disrupted =
Probability of a nationwide event + Probability that all 3 get disrupted uniquely
=2.7%+ (5%*5%*5%)
=0.027+0.000125
=0.027125
Question:- What is the probability that all three suppliers will be disrupted using option 2? (round your response to five decimal? places).
The probability of all the three suppliers getting disrupted =
Probability of a super event + Probability that all 3 get disrupted uniquely
=0.5% +(21%)3
=0.005+0.009261
=0.014261
Question- What is the total annual purchasing and transportation cost plus expected annualized disruption cost for option 1?
Total purchasing & transport cost + Probability of disruption*Loss on disruption
=$900,000 + $520,000 *0.027125
=$914105
Question:- What is the total annual purchasing and transportation cost plus expected annualized disruption cost for option 2?
Total purchasing & transport cost + Probability of disruption*Loss on disruption
=$910,000 + $520,000 *0.014261
=$917415.72
Question:- Based on the total annual purchasing and transportation cost plus expected annualized disruption? cost, which option seems best?
Answer:- Option 1 seems to be best due to lesser total expected cost