Reference no: EM132910221

The EOM Management took over the management of EOM facilities and its maintenance since 2011. Upon the turnover from its developer, there is an agreement that the Board of Directors should manage the Subdivision effectively within the next five (5)-year period to maintain its exclusive status. The EOM Subdivision is being managed by its (9) members of the Board of Directors wherein according to EOM By-Laws, five (5) directors will be holding the officers' positions. Furthermore, based on the corresponding guidelines, the president will have the power to create committee chairpersons as it may deem necessary in their operations. A certain board resolution was created giving an honorarium of Two Thousand Pesos (PhP 2,000) per month for each committee chairperson. As per By-Laws, the Directors of EOM Subdivision will not receive any amount of compensation during their term or else they will be terminated from their post.

In the most recent Board of Directors' meeting, they were able to identify the current problems in their Subdivision based on the complaints of the homeowners: first, they need to hire a new crew to join the current maintenance force with three (3) members assigned in swimming pool, Phase 1 and Phase 2. These repairmen should accommodate the needs of 244 homeowners. Each homeowner is paying PhP 2,000 per month for his association dues. The EOM subdivision has an administrative assistant with a salary of PhP 18,000 per month and each repairman receives a monthly pay of PhP 15,000. The management pays the following amounts every month for their operations: PhP 18,000 fixed rate for street light, PhP 15,000 for swimming pool chemical maintenance, clubhouse electrc bill of PhP 6,000, tennis and basketball courts' electrical bill of PhP 10,000, swimming pool's electric bill of PhP 10,000, telephone bill of PhP 2,400, water bill of 10,000, and security guards' service fee of PhP 78,000. The second problem is that they need an office clerk to assist the administrative officer in paperwork, most especially during collection due date of the homeowners' water bill. The third problem is the monthly system loss in their water bill with an average of PhP 144,000. Every member of the Board of Directors is free from his monthly due of PhP 2,000 since they do not receive any form of compensation. The EOM Management has considered increasing the monthly association's due to increase the fund, but due to lack of quorum, they cannot amend their By-Laws.

Discussion Questions:

1. Should the EOM Management hire a new maintenance crew and an additional office clerk? (Yes or No) Justify your answer by showing your computations.

2. Based on the current situation, what solutions can you recommend?

3. Add an information that will illustrate uncertainty to the problem by giving 2 state of nature possible to this problem, in such a way that you can construct the probability tree and conduct a sensitivity analysis. (add 2 state of nature possible with corresponding probabilities)

4. Based on your additional information, what recommendation can you provide to make a sound decision?