OPERATIONS MANAGEMENT LL PACKAGE
11th Edition
ISBN: 9781323592632
Author: KRAJEWSKI
Publisher: Pearson Custom Publishing
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Textbook Question
Chapter 4, Problem 23P
Referring to Problem 7, the operations manager at Macon Controls believes that pessimistic demand has a probability of 20 percent, expected demand has a probability of 50 percent, and optimistic demand has a probability of 30 percent. Currently, new machines must be purchased at a cost of $500,000 a piece, the price charged for each control unit is $110, and the variable cost of production is $50 per unit. (Hint: since the price and variable cost for each control unit are the same, the profit maximizing product mix will be the same as the mix that maximizes the total number of units produced.)
- Draw a decision tree for this problem.
- How many machines should the company purchase, and what is the expected payoff?
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Chapter 4 Solutions
OPERATIONS MANAGEMENT LL PACKAGE
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