MacDonald Products, Inc., of Clarkson, New York, has the option of(a) proceeding immediately with production of a new top-of-the-line stereo TV that has just completed prototype testing or(b) having the value analysis team complete a study.If Ed Lusk, VP for operations, proceeds with the existing prototype (option a), the firm can expect sales to be 100,000 units at $610each, with a probability of 0.78 and a 0.22 probability of 65,000 at $610. If, however, he uses the value analysis team (option b), thefirm expects sales of 80,000 units at $740, with a probability of 0.74 and a 0.26 probability of 65,000 units at $740. Value engineering,at a cost of $115,000, is only used in option b. Which option has the highest expected monetary value (EMV)?The EMV for option a is $ and the EMV for option b is $Therefore, optionhas the highest expected monetary value.(Enter your responses as integers.)

Find the given details below: Given details Sales 1 Sales 2 Value Engineering cost ($)…

Answered: MacDonald Products, Inc., of Clarkson,…

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

ChapterC: Cases

Section: Chapter Questions

Problem 5.2SA

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