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Zhu Manufacturing is considering the Introduction of a family of new products. Long-term demand for the product group is somewhat predictable, so the manufacturer must be concemed with the risk of choosing a process that is inappropriate. Faye Zhu is VP of operations. She can choose among batch manufacturing or custom manufacturing, or she can invest in group technology Zhu wont be able to forecast demand accurately until after she makes the process choice. Demand will be classified into four compartments: poor, fair, good, and excellebt The table below indicates the payoffs (profits) associated with each process/demand combination, as well as the probabilities of each long-term demand level: Demand Good Poor Fair Excellent Probability 0.15 -$300,000 $100,000 -$1,200.000 0.40 $800,000 $400.000 0.30 $1,200,000 $750,000 $500,000 0.15 $1,300,000 $800,000 $2,200,000 Batch Custom Group technology $00,000 a) The alternative that provides Zhu the greatest expected monetary value (EMV) is Batch The EMV for this decision is $ (enter your answer as a whole number). b) The amount that Faye Zhu would be willing to pay for a forecast that would accurately determine the level of demand in the future $ (enter your answer as a whole number).

Zhu Manufacturing is considering the Introduction of a family of new products. Long-term demand for the product group is somewhat predictable, so the manufacturer must be concemed with the risk of choosing a process that is inappropriate. Faye Zhu is VP of operations. She can choose among batch manufacturing or custom manufacturing, or she can invest in group technology Zhu wont be able to forecast demand accurately until after she makes the process choice. Demand will be classified into four compartments: poor, fair, good, and excellebt The table below indicates the payoffs (profits) associated with each process/demand combination, as well as the probabilities of each long-term demand level: Demand Good Poor Fair Excellent Probability 0.15 -$300,000 $100,000 -$1,200.000 0.40 $800,000 $400.000 0.30 $1,200,000 $750,000 $500,000 0.15 $1,300,000 $800,000 $2,200,000 Batch Custom Group technology $00,000 a) The alternative that provides Zhu the greatest expected monetary value (EMV) is Batch The EMV for this decision is $ (enter your answer as a whole number). b) The amount that Faye Zhu would be willing to pay for a forecast that would accurately determine the level of demand in the future $ (enter your answer as a whole number).

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter9: Decision Making Under Uncertainty
Section: Chapter Questions
Problem 30P
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Zhu Manufacturing is considering the Introduction of a family of new products. Long-term demand for the product group is somewhat predictable, so the manufacturer must be concemed with the risk of choosing a process that is inappropriate. Faye Zhu is VP of operations. She can choose among batch manufacturing or custom manufacturing, or she can invest in group technology, Zhu won't be able to forecast demand accurately until after she makes the process choice. Demand will be classified into four compartments: poor, fair, good, and excellebt The table below indicates the payoffs (profits) associated with each processidemand combination, as well as the probabilities of each long-term demand level: Demand Poor Fair Good Excellent Probability Batch Custom 0.15 0.40 -$300,000 $100,000 $1,200,000 $800,000 $400,000 $00,000 0.30 $1,200,000 $750,000 $500,000 0.15 $1,300,000 $800,000 $2,200,000 Group technology a) The alternative that provides Zhu the greatest expected monetary value (EMV) is Batch The EMV for this decision is $ (enter your answer as a whole number). b) The amount that Faye Zhu would be willing to pay for a forecast that would accurately determine the level of demand in the future $ whole number). (enter your answer as a
Transcribed Image Text:Zhu Manufacturing is considering the Introduction of a family of new products. Long-term demand for the product group is somewhat predictable, so the manufacturer must be concemed with the risk of choosing a process that is inappropriate. Faye Zhu is VP of operations. She can choose among batch manufacturing or custom manufacturing, or she can invest in group technology, Zhu won't be able to forecast demand accurately until after she makes the process choice. Demand will be classified into four compartments: poor, fair, good, and excellebt The table below indicates the payoffs (profits) associated with each processidemand combination, as well as the probabilities of each long-term demand level: Demand Poor Fair Good Excellent Probability Batch Custom 0.15 0.40 -$300,000 $100,000 $1,200,000 $800,000 $400,000 $00,000 0.30 $1,200,000 $750,000 $500,000 0.15 $1,300,000 $800,000 $2,200,000 Group technology a) The alternative that provides Zhu the greatest expected monetary value (EMV) is Batch The EMV for this decision is $ (enter your answer as a whole number). b) The amount that Faye Zhu would be willing to pay for a forecast that would accurately determine the level of demand in the future $ whole number). (enter your answer as a
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