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1. To ensure that the correct size of heart valve is available for heart surgery, Heart Plus, the maker of the valves employs salespeople to place and maintain inventories at hospitals in its market. After a valve is used in surgery, Heart Plus, bills the patient's insurance company and credits the sales person with a sale. Each sales person earns a commission based on a percentage of revenue of the sales in her territory.
Because Heart plus does not get paid until it sells its valve, it must bear the cost of holding the inventory calculated as the cost of capital (12%) times the wholesale cost of the valves placed in the hospital.

OK here is the problem:

Heart Plus faces a cost of holding inventory that is higher than its competitors. The salespeople are clearly overstocking hospitals in their territory. They have asked you to figure out how to fix the problem.

In answering the question use your economics and the following three questions as a guide:

1. Who is making the bad decision?
2. Does the decision maker have enough information to make a good decision?
3. Do they have an incentive to do so?

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https://brainmass.com/economics/regression/315550

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Here are the answers. This is not a math problem, just a discussion case. Hope this helps, Cecilia

In answering the question use your economics and the following three questions as a guide:

1. Who is making the bad decision?

The sales person has the decision power. The system that has been put in place is such a way that they have all decision power. They must ensure that valves are available so they make sure they ...

Solution Summary

1. To ensure that the correct size of heart valve is available for heart surgery, Heart Plus, the maker of the valves employs salespeople to place and maintain inventories at hospitals in its market. After a valve is used in surgery, Heart Plus, bills the patient's insurance company and credits the sales person with a sale. Each sales person earns a commission based on a percentage of revenue of the sales in her territory.
Because Heart plus does not get paid until it sells its valve, it must bear the cost of holding the inventory calculated as the cost of capital (12%) times the wholesale cost of the valves placed in the hospital.

OK here is the problem:

Heart Plus faces a cost of holding inventory that is higher than its competitors. The salespeople are clearly overstocking hospitals in their territory. They have asked you to figure out how to fix the problem.

In answering the question use your economics and the following three questions as a guide:

1. Who is making the bad decision?
2. Does the decision maker have enough information to make a good decision?
3. Do they have an incentive to do so?

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2. Bayside insurance offers two health plans. Under plan A, Giselle would have to pay the first $170 of her medical bill, plus 40% of the rest. Under plan B, Giselle would have to pay the first $240, but only 35% of the rest. For what amount of medical bills will plan B save Giselle money? Assume she has over $240 in bills.

3. In order to receive maximum results from aerobic exercise, one should maintain ones heart rate at a certain level. A 30 year old women with a resting heart rate with 65 beats per minute should keep her heart rate between 140 and 165 beats per minute while exercising. She checks her pulse 10 seconds while exercising. What should the number of beats be? Between ___ and _____ BPM

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1. The body mass index, I, can be used to determine an individuals risk for heart disease. An index less than 25 indicates a low risk. The body mass index given by the formula, or model, I = 700W/H2, (H2 means to the second power) where, W= weight in pounds, and H= height, in inches. Francis weighs 181 pounds and stands 74 inches tall. What is his approximate body mass index? Find an inequality describing all weights W that Francis can have and be in the low risk category.

2. Bayside insurance offers two health plans. Under plan A, Giselle would have to pay the first $170 of her medical bill, plus 40% of the rest. Under plan B, Giselle would have to pay the first $240, but only 35% of the rest. For what amount of medical bills will plan B save Giselle money? Assume she has over $240 in bills.

3. In order to receive maximum results from aerobic exercise, one should maintain ones heart rate at a certain level. A 30 year old women with a resting heart rate with 65 beats per minute should keep her heart rate between 140 and 165 beats per minute while exercising. She checks her pulse 10 seconds while exercising. What should the number of beats be? Between ___ and _____ BPM

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