There are three sections in this final assignment, out of which you are required to    answer the first section. Please choose either the second section or the last section to answer next. The marks allocated to the three sections differ. There is a total of  100 marks.

Introduction: A small chocolate company which only produces dark (bitter) chocolate has retained you as a consultant to answer questions and provide advice about its growth.

Section One

Q1. The Managing Director of a chocolate company has decided to start a new product line (chocolates with filling). New machinery has to be installed. There are three processes to install the new machine. Construction, electrical and training. Some of these processes can occur simultaneously and some of them must be in sequence. There are three people for each process respectively. The Master mason is in charge of construction, the Master electrician is in charge of electrical and the    Master chocolatier is in charge of training. Which of these three will have to be monitored closely so that the bakery can start making the new chocolates as early as possible?

(i)       The Master mason has to build a space for the machinery. It will take four weeks.

(ii)      The Master electrician can take care of the wiring for the new machinery

without the machine. It will take three weeks.

(iii)      Once a space has been made by the Master mason, the machinery which

has been delivered already can be installed in the space.

(iv)     The Master mason will take care of exhaust ducts for the new machinery.

This will take three weeks.

(v)      The Master electrician will set about connecting the new machinery to the electrical wires. This will take two weeks.

(vi)     Andrew, the Master chocolatier will take his annual holiday for five weeks

while the Master electrician and the Master mason are at work.

(vii)     The Master electrician will have to shut down operations at the bakery to

take care of the wiring for the increased load of the new machinery. This should take two weeks. During this time nobody will be able to work.

(viii)    The Master mason will have to make a storage space for the new line of

chocolates. This will take two weeks.

(ix)     The Master electrician will have to connect the new refrigerator and other

storage equipment when the storage space is ready. This will take three weeks.

(x)      The Master chocolatier can start the training without electricity on the new machinery as soon as it is installed. This will take three weeks.

(xi)     The Master chocolatier will finish the training on the new machinery after it

has been connected to electricity. This will take two weeks.

(xii)     The company can start producing filled chocolates once the training is

over, the storage for the filled chocolates is ready, the machinery installed and connected to electricity.

(15 marks)

Q2. The chocolate company is contemplating the addition of a new range of products. There are differing viewpoints on the viability of this addition. The Managing Director of the company relies on three key advisors – Andrew, the Master chocolatier, Belinda the Sales manager and Cynthia the Marketing manager. Andrew is very optimistic about the new product line, Belinda is pessimistic and Cynthia as a veteran marketer is a realist. They have given their best estimates of sales under

three different market conditions.

Unfortunately, Andrew wrote his numbers on a greasy sheet of paper and disappeared for the rest of the day. All you can make out are the numbers 30 and   80. Use the last two digits of your z-number as the third number in Andrew’s estimate. Put the three numbers (30, 80 and your last two digits) in increasing order and take it as Andrew’s three estimates for Not good, Good and Excellent markets respectively.

The next table shows how much cost is incurred by each salesperson in each area.

The costs of the salespeople have to be reimbursed by the company.

First, find the optimum allocation of salesperson to area. Only one salesperson should be allocated per area and only one area should be allocated per salesperson. The optimum allocation should maximise profits (revenue – cost). Write down your conclusion (in the form of a table) as well as how you arrived at the conclusion. Include tables and computer outputs. You may have to paste an image of your computer output in your file.

Next, refer to the results of your regression in the previous question. The accountant of the chocolatier is either optimistic or pessimistic depending on whether the regression shows that more salespeople lead to more sales (optimistic) or more salespeople don’t have an effect on sales (pessimistic). Allocate the salespeople to  maximise revenue in case the accountant is optimistic or allocate salespeople to minimise costs in case the accountant is pessimistic.

Hint: Look at the significance level in the regression.  (40 marks)

Section Three

Q1. What is Prospect Theory? Describe the value function of Prospect Theory and   its implications for consumers (e.g. mental accounting of credit card debt). How does it affect you? (40 marks)

Q2. In terms of heuristics and biases, what are the following and how do they affect decisions? How does it affect you?

1.  Independence of Irrelevant Alternatives 2. Endowment effect 3. Sunk cost 4. Windfalls 5. Anchor-and-adjust (30 marks)