McBurger, Inc., wants to redesign its kitchensto improve productivity and quality. Three designs, calleddesigns K1, K2, and K3, are under consideration. No matterwhich design is used, daily production of sandwiches at a typi-cal McBurger restaurant is for 500 sandwiches. A sandwichcosts $1.30 to produce. Non-defective sandwiches sell, on theaverage, for $2.50 per sandwich. Defective sandwiches cannotbe sold and are scrapped. The goal is to choose a design thatmaximizes the expected profit at a typical restaurant overa 300-day period. Designs K1, K2, and K3 cost $100,000,$130,000, and $180,000, respectively. Under design K1, thereis a .80 chance that 90 out of each 100 sandwiches are non-defective and a .20 chance that 70 out of each 100 sandwichesare non-defective. Under design K2, there is a .85 chance that90 out of each 100 sandwiches are non-defective and a .15chance that 75 out of each 100 sandwiches are non-defective.Under design K3, there is a .90 chance that 95 out of each 100sandwiches are non-defective and a .10 chance that 80 out ofeach 100 sandwiches are non-defective. What is the expectedprofit level of the design that achieves the maximum expected300-day profit level?
McBurger, Inc., wants to redesign its kitchens
to improve productivity and quality. Three designs, called
designs K1, K2, and K3, are under consideration. No matter
which design is used, daily production of sandwiches at a typi-
cal McBurger restaurant is for 500 sandwiches. A sandwich
costs $1.30 to produce. Non-defective sandwiches sell, on the
average, for $2.50 per sandwich. Defective sandwiches cannot
be sold and are scrapped. The goal is to choose a design that
maximizes the expected profit at a typical restaurant over
a 300-day period. Designs K1, K2, and K3 cost $100,000,
$130,000, and $180,000, respectively. Under design K1, there
is a .80 chance that 90 out of each 100 sandwiches are non-
defective and a .20 chance that 70 out of each 100 sandwiches
are non-defective. Under design K2, there is a .85 chance that
90 out of each 100 sandwiches are non-defective and a .15
chance that 75 out of each 100 sandwiches are non-defective.
Under design K3, there is a .90 chance that 95 out of each 100
sandwiches are non-defective and a .10 chance that 80 out of
each 100 sandwiches are non-defective. What is the expected
profit level of the design that achieves the maximum expected
300-day profit level?
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