Tamahuy has another product, E50, which it currently sells directly from the factory to customers. The...

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Tamahuy has another product, E50, which it currently sells directly from the factory to customers. The details for the E50 are as follows: Selling Price / unit $3,800 Current Annual Demand Direct Materials/unit Direct Labor/unit $400 $321 # of customers 180 tons Six Smallest customer order per year 28 tons The E50 uses twice the factory variable overhead as the average ton produced in the factory. In other aspects the E50 is very average. The Proposal: A consultant has proposed that Tamahuy supply the E50 exclusively through the warehouse channel so that customers can purchase the E50 panel in portions less than a ton. This is in response to the fact that the average E50 customer has been with Tamahuy for six years with no new customers being added in the last five years. Extensive independent market research has estimated that 40 more tons could be sold per year to new customers if they had the option to buy small portions. In fact, surveys indicate that the average order size, for all orders, would be of a ton. If the new distribution channel is selected, there is a 15% probability that one existing customer would be lost and a 5% probability that two of the existing customers would be lost since the new price would be $5,500 per ton of E50. Tamahuy plans to keep 9 tons of E50 in inventory so as to avoid the "bad-will" from a stock-out. What are the possible sales levels if they choose "warehouse" channel? Best Case "Medium case" Worst Case Tamahuy has another product, E50, which it currently sells directly from the factory to customers. The details for the E50 are as follows: Selling Price / unit $3,800 Current Annual Demand Direct Materials/unit Direct Labor/unit $400 $321 # of customers 180 tons Six Smallest customer order per year 28 tons The E50 uses twice the factory variable overhead as the average ton produced in the factory. In other aspects the E50 is very average. The Proposal: A consultant has proposed that Tamahuy supply the E50 exclusively through the warehouse channel so that customers can purchase the E50 panel in portions less than a ton. This is in response to the fact that the average E50 customer has been with Tamahuy for six years with no new customers being added in the last five years. Extensive independent market research has estimated that 40 more tons could be sold per year to new customers if they had the option to buy small portions. In fact, surveys indicate that the average order size, for all orders, would be of a ton. If the new distribution channel is selected, there is a 15% probability that one existing customer would be lost and a 5% probability that two of the existing customers would be lost since the new price would be $5,500 per ton of E50. Tamahuy plans to keep 9 tons of E50 in inventory so as to avoid the "bad-will" from a stock-out. What are the possible sales levels if they choose "warehouse" channel? Best Case "Medium case" Worst Case

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Answer To determine the possible sales levels for the warehouse channel we can consider the best cas... View the full answer