CHINHOYI UNIVERSITY OF TECHNOLOGY

SCHOOL OF ENTREPRENEURSHIP AND BUSINESS MANAGEMENT

GRADUATE BUSINESS SCHOOL

MASTER OF SCIENCE IN STRATEGIC MANAGEMENT

QUANTITATIVE MANAGEMENT (MSCSM6-01) INDIVIDUAL ASSIGNMENT

TOTAL MARKS 70 MARKS

Question one

A Government department invited applications for tenders and your company is considering
whether it should tender for two contracts (ZS1 and ZS2) on offer from a government
department for the supply of certain components. The company has three options:

 tender for ZS1 only; or

 tender for ZS2 only; or
 tender for both ZS1 and ZS2.

If tenders are to be submitted the company will incur additional costs. These costs will have
to be entirely recouped from the contract price. The risk, of course, is that if a tender is
unsuccessful the company will have made a loss.

The cost of tendering for contract ZS1 only is $50,000. The component supply cost if the
tender is successful would be $18,000.

The cost of tendering for contract ZS2 only is $14,000. The component supply cost if the
tender is successful would be $12,000.

The cost of tendering for both contracts ZS1 and contract ZS2 is $55,000. The component
supply cost if the tender is successful would be $24,000.

For each contract, possible tender prices have been determined. In addition, subjective
assessments have been made of the probability of getting the contract with a particular tender
price as shown below. Note here that the company can only submit one tender and cannot, for
example, submit two tenders (at different prices) for the same contract.

Option Possible Probability

tender of getting
prices (S) contract
MS1 only 130,000 0.20
115,000 0.85
MS2 only 70,000 0.15
65,000 0.80
60,000 0.95
MS1 and MS2 190,000 0.05
140,000 0.65

In the event that the company tenders for both ZS1 and ZS2 it will either win both contracts
(at the price shown above) or no contract at all.

Required

a) Using a Decision Tree Diagram, what do you suggest the company should do and why?

[40 marks]

b) Evaluate your suggested course of action. [10 marks]

Question two

a) 2000 people are employed by a certain company. Of this number 1250 are employed in the
production department and 400 in administration, the remainder being employed in the sales
department.

In the sales department, 200 of the employees are adult males, 100 are adult females and the
remainder is either male or female juveniles.

In the production department, there are 540 male adults and 155 male juveniles.

In the administration department, there are 45 female adults and 50 female juveniles.

In all, there are 925 adult males employed and 575 adult females. The total number of female
juveniles employed by the firm is 200 and the remainder is male juveniles.

i) Show this data on a contingency table for the departmental employees of the company.

[10 marks]

ii) What is the probability of picking an employee who is a male adult or someone from the
sales department? State the type of event and interpret your answer. [5 marks]

iii) What is the probability of picking a female juvenile on condition that she is from the
production department? State the type of event and interpret your answer. [5 marks]