Reference no: EM132858164

1. You're looking to hire a framing contractor to frame houses for you and you plan to build 45 over the next 2 years. The market is picking up and framing prices have been and are continuing to increase and there is a limited supply of labour. This framer currently has a competitive price and comes highly recommended. Pre-vetting for all standard qualifications was completed before contracting the framer. Once starting construction, it is revealed that the framer is missing a piece of equipment that meets occupational health and safety requirements, preventing them from starting work. The framer does not have the liquid capital to purchase the equipment before starting his first house.

Average market framing rate: $15,000/unit

The market has seen an average increase of 10% every 3 months, and that is not expected to change.

This framer can frame for $13,500/unit

The average time to complete a unit is 3 weeks.

Payment terms to this framer are net 30 or 5/15

Required equipment cost $5000

Make any reasonable assumptions based up your knowledge for any information not given. Provide as many pages of documentation, tables, and analysis as required.

Questions:

A. Do you proceed with this contract, and if so, are there any changes that need to be made?

B. How would you proceed if your projected starts increased to 45/year?

C. How would you react if the average market for framing dropped and stabilized to $13,500?

2. You need to purchase $6000 of materials for different small projects. There are 150 different types of material required in predetermined quantities with various amounts required for each small project, there are 15 different types of projects. The amounts vary from 0-500 pieces of each material, materials that are required in small quantities are always in small quantities and those required in large quantities are always required in large quantities. You have 4 different geographical regions to buy for in Alberta and Saskatchewan, and each region's pricing does vary. Each region has at least 4 contracted suppliers and at least as many uncontracted. Market pricing is update weekly.

Make any reasonable assumptions based up your knowledge for any information not given. Provide as many pages of documentation, tables, and analysis as required.

Questions:

A. How do you determine which supplier to use in each region? Provide examples of the analysis with your own data

B. How much of a cost difference can you tolerate between each region?

C. How does Saskatchewan's recent change to their PST affect your analysis?

D. How would a 10% US tariff on exporting these materials affect your outlook?

E. What terms do you use for the contracts?

3. At my favourite coffee shop customers wait patiently in line for great service. Customers are served with a first come first serve basis. Experience shows that about 15 new customers arrive, on average, every hour. The time between arrivals is random. The owner tells you that the barista can serve an average of 20 customers per hour. Service time of customer is exponentially distributed - i.e. a few customers place complex orders that take longer to make but most customers place simple orders that are quick to make. Answer the following questions:

A. The barista is busy ___________% of the time. (explain. Creative explanations are good)

B. On average how many people will you find in line + waiting for their coffee at any given time = ________

C. On average the customer will wait for _______ minutes for his coffee from the time he/she comes in; of that _______ minutes will be spent in line.

D. The great barista got a new job and the coffee shop hired a junior barista. Also at the same time traffic increased. The change was that 20 people started showing up at the coffee shop every hour, on average and the barista being new could only serve 15 customers, on average, per hour. Do your previous answers change?