Question
1:
A
product
manager
for
a
soap
manufacturer
must
decide
whether
to
offer
a
new,
biodegradable
laundry
detergent.
The
projected
profit
from
a
successful
detergent
is
$2
million,
whereas
failure
of
the
product
would
result
in
a
loss
of
$1
million.
The
manager
currently
thinks
there
is
a
40%
chance
that the
product
will
be
successful.
Not
offering
the
product
would
not
change
profits.
Construct
a
payoff
table
for
this
decision.
What
is
the
optimal
strategy?
What
is
the
EV
of
this
strategy?
What
is
the
EVwWPI?
What
is
the
EVPI?
Question
2:
Remington
Manufacturing
is
planning
its
next
production
cycle.
The
company
can
produce
three
products,
each
of
which
must
undergo
machining,
grinding
and
assembly
operations.
The
following
table
summarizes
the
hours
of
machining,
grinding
and
assembly
required
by
each
unit
of
each
product,
and
the
total
hours
of
capacity
available
for
each
operation.
Hours
Required
by
Product
1
Product
3
Total
hours
Available
Operation
Product
2
Machining
2
3
6
600
Grinding
6
3
4
300
Assembly
5
6
2
400
The
per
unit
profit
from
each
of
the
products
and
the
setup
costs
are
listed
in
the
table
below:
Product
1
Product
2
Product
3
Profit
per
unit
$48
$55
$50
Setup
cost
$1000
$800
$900
Since
there
is
a
heavy
demand
for
the
products,
the
marketing
department
believes
that
all
the
products
produced
within
the
available
capacities
can
be
sold.
The
management
of
Remington
wants
to
determine
the
most
profitable
mix
of
products
to
produce.
Formulate
an
integer-
programming
model
on
behalf
of
Remington.
Define
any
variables
you
use
and
clearly
specify
the
objective
function
and
constraints.
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