The Sales Director of Icenice has been in negotiations with a potential customer who is willing to enter a contract to purchase a fixed quantity of Icetwist for 90 pence per unit. The customer is considering whether to order a fixed monthly quantity of 900, 1500, 2100 or 2400 units.
Required
a) Calculate all possible contribution levels that could result from accepting this contract.
(5 marks)
b) Recommend which quantity the Sales Director should agree to supply on the fixed contract based on each of the following; expected value, maximax, maximin, minimax regret.
(9 marks)
c) Critically evaluate the limitations of using the calculations in parts 1 and 2 above for decision making and discuss two non-financial considerations that could be accounted for in addition to the financial solutions presented above.
(11 marks)
