KMacDonald 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 95,000 units at $510each, with a probability of 0.31 and a 0.69 probability of 80,000 at $510. If, however, he uses the value analysis team (option b),the firm expects sales of 75,000 units at $720, with a probability of 0.75 and a 0.25 probability of 60,000 units at $720. Valueengineering, at a cost of $100,000, 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, option a has the highest expected monetary value.(Enter your responses as integers.)

Given data: in option (a)The firm can expect sales = 95,000 units at $510 each With probability of…

Answered: ← MacDonald Products, Inc., of…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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