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SUMMATIVE ASSIGNMENT  BUSI4G215

Q1. The first question is whether it is advisable to hire another salesperson. The bakery has had different numbers of salespeople over the last eleven years.

First, take the last two digits of your z-number. One sales datapoint is missing in the table below. Use the last two digits of your z-number in place of the missing sales    datapoint.

 No of           Salespeople Sales (in 00’s) 6 65 4 54 5 50 3 43 5 43 7 58 6 53 3 45 4 33 7 56 5 ?

Use regression to answer the question of whether more salespeople lead to higher sales. Remember to interpret the regression to answer the question. Provide both  the results of the regression and your interpretation.

(30 marks)

Q2. There are five sales areas allocated to each of the five salespeople currently       employed. Each of the salespeople has different results in different areas. Those       results comprise sales (revenue) achieved and costs. The five salespeople are Alan, Bill, Cathy, Dorothy and Elsa. The five areas are A, B, C, D and E. In the table           below, you will see how much revenue can be achieved by each salesperson in each

area.

 REVENUE Alan Bill Cathy Dorothy Elsa A 45 36 60 58 53 B 56 45 49 48 57 C 60 34 45 44 49 D 38 45 60 50 49 E 29 36 40 55 45

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.

 COSTS Alan Bill Cathy Dorothy Elsa A 24 20 34 30 29 B 35 19 32 24 28 C 37 18 28 20 17 D 34 22 37 19 21 E 21 24 35 32 19

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 bakery 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)

Q3. The Managing Director has decided to start a new product line - muffins. 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 baker is in charge of         training. Which of these three will have to be monitored closely so that the bakery     can start making muffins as early as possible?

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

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

without the machine. It will take two 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 two weeks.

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

(vi)     Andrew, the Master baker will take his annual holiday for four 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 a week. During this time nobody will be able to work.

(viii)    The Master mason will have to make a storage space for the muffins. This

will take a week.

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

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

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

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

been connected to electricity. This will take one week.

(xii)     The bakery can start producing the new product once the training is over,

the storage for the product is ready, the machinery installed and connected to electricity.

(15 marks)

Q4. The bakery 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     bakery relies on three key advisors – Andrew, the Master baker, 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.

 Not good market 30% probability Good market 40% probability Excellent market 30% probability Andrew ? ? ? Belinda 15 30 35 Cynthia 20 45 85

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 25 and 75. Use the last two digits of your z-number as the third number in Andrew’s

estimate. Put the three numbers (25, 75 and your last two digits) in increasing order and take it as Andrew’s three estimates for Not good, Good and Excellent markets  respectively.

How much should you ask the Managing Director to pay you for answering the        question as to whose estimates (Andrew, Belinda or Cynthia) to take a decision by?

(15 marks)

Q5. What is Prospect Theory? Describe the value function of Prospect Theory and its implications for consumers. How does it affect you?

(40 marks)

Q6. In terms of heuristics and biases, what are the following and how do they affect decisions? How does it affect you?

1.  Endowment 2. Framing 3. Sunk cost 4. Windfalls 5. Anchor-and-adjust

(30 marks)