Suppose That the Manager of a Company Has Estimated the Probability

question 173

Multiple Choice

Suppose that the manager of a company has estimated the probability of a super-event sometime during the next five years that will disrupt all suppliers as 5%, and the probability of a unique-event that would disrupt one of them sometime during the next five years to be 10%. Supplier management costs during this period are $30,000 per supplier. The financial cost incurred if all suppliers are disrupted at the same time is estimated to be $2,000,000. Assume that up to five nearly identical suppliers are available. How many suppliers should the manager use?

• A) 1
• B) 2
• C) 3
• D) 4
• E) 5