Residents of Mill River have fond memories of ice skating at a local park. An artist has captured the experience in a drawing and is hoping to reproduce it and sell framed copies to current and former residents. He thinks that if the market is good he can sell 400 copies of the elegant version at $125 each. If the market is not good, he will sell only 300 at $90 each. He can make a deluxe version of the same drawing instead. He feels that if the market is good he can sell 500 copies of the deluxe version at $100 each. If the market is not good, he will sell only 400 copies at $70 each. In either case, production costs will be approximately S35.000 He can also choose to do nothing. If he believes there is a 50% probability of a good market, what should he do? Why?
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Chapter 5 Solutions
EBK PRINCIPLES OF OPERATIONS MANAGEMENT
- How do firms decide what the upper and lower tracking limits should be?arrow_forwardWhen performing sales mix analysis , which one of the following is false : a. Producing and selling more units of the product with a higher contribution margin would likely decrease the breakeven point b. Making changes to the sales mix will likely cause a change in the breakeven point c. The sales mix is usually assumed to be remain the same . d. Shifting the sales mix to the product with a lower contribution margin will likely ncrease the overall contribution margin e. Normally the calculation of the breakeven point for multiproduct is more complicated than that for a single productarrow_forwardSun TV sells TV sets. It does not sell smart TVs so customers do not come to Sun TV if they want to purchase smart TVs. Sun TV wants to start selling smart TVs and will only sell smart TVs to customers to whom they advertise. Managers use customer information (income level, previous purchase history) to decide which customers they should target. The team needs to decide how sure it must be in predicting customer interest in a smart TV. If it is too cautious, it will choose a very high cutoff probability and only market to customers who it believes are very likely to be in the market for a smart TV. This may cause them to miss out on many customers. If they are too aggressive and choose a low cutoff probability, they may identify more individuals interested in buying smart TVs but also end up wasting marketing dollars on customers who are not interested in purchasing smart TVs. To choose a cutoff probability, the team develops the confusion matrices below for two cutoff probabilities on…arrow_forward
- Howard Weiss, Inc., is considering building a sensitive new radiation scanning device. His managers believe that there is aprobability of .35 that the ATR Co. will come out with a competitive product. If Weiss adds an assembly line for the product and ATR Co. does not follow with a competitive product, Weiss's expected profit is $40,000 ; if Weiss adds an assembly line and ATR follows suit, Weiss still expects $20,000 profit. If Weiss adds a new plant addition and ATR does not produce a competitive product, Weiss expects a profit of $600,000 ; if ATR does compete for this market, Weiss expects a loss of $120,000.Part 2a) Expected value for the option = $ b)Expected value for the build new plant option = c) The alternative that provides Weiss the…arrow_forwardCory Rogers is ready to write the first draft of the final report for Auto Concepts. Nick Thomas of Auto Concepts has told Cory that ZEN Motors has its own marketing research department and that researchers there are eager to read his report. Cory knows they will be particularly interested in technical issues such as determination of sample size and margin of error. Cory has also had a frank discussion with Nick about conclusions and recommendations. Nick told him, “Cory, I want to know what the numbers say. What are the conclusions based on those numbers? In terms of how to proceed, I will meet with my top staff members, and we will make those decisions. We have to factor in many constraints to make final decisions.” As an experienced marketing researcher, Cory is very familiar with the steps in the marketing research process. Knowledge of these steps is useful in writing the method section of his marketing research reports. For example, Cory knows he should address the types and…arrow_forwardWhen a customer often revises the product's goals, how do you determine whether the software is of sufficient quality?arrow_forward
- A developer has requested your advice for the selling price per sg.m, of flats in an area of your choice. You should retrieve 20 asking prices for residential flats in your preferred area from agents' websites. Proceed with all necessary adjustments and estimate a value per sg.m, for a typical 2 bedroom flat that he is aiming to build. Additionally, retrieve asking rental prices for the same area and proceed with the necessary adjustments in order to estimate the ARY. Present your analysis and the way of thinking in 500 words and also support your opinion with an excel table showing your adjustments.arrow_forwardHome-Style Cookies has decided to implement an employee suggestion to open a retail cookie shop in the front area of their manufacturing building in Hudson, New York. The employee offices currently occupying that space can easily be moved to the production area and there is ample parking for customers. Even though the plant is located in a small town, it is easily accessible and visible from the scenic highway which leads to Manhattan, New York. Through research and initial consumer testing, the retail shop will offer individual cookies for sale, pre-packaged dozen cookies (one kind of cookie), and gift cookie assortments in logoed tins in two sizes, 2-dozen and 3-dozen. The Home-Style executive team has hired you as a consultant to create the initial plan for the new retail shop. They have given you the first three months’ forecast, represented in the following table (Retail Shop Forecast). Embed your service blueprint in your document or submit it separately. Month Chocolate…arrow_forwardDescribe THE PURPOSE OF THE SIMPLEX METHOD.arrow_forward
- Pat James, the purchasing agent for a local plant of the Oakden Electronics Division, was considering the possible purchase of a component from a new supplier. The component’s purchase price, $0.90, compared favorably with the standard price of $1.10. Given the quantity that would be purchased, Pat knew that the favorable price variance would help to offset an unfavorable variance for another component. By offsetting the unfavorable variance, his overall performance report would be impressive and good enough to help him qualify for the annual bonus. More importantly, a good performance rating this year would help him to secure a position at division headquarters at a significant salary increase. Purchase of the part, however, presented Pat with a dilemma. Consistent with his past behavior, Pat made inquiries regarding the reliability of the new supplier and the part’s quality. Reports were basically negative. The supplier had a reputation for making the first two or three deliveries on…arrow_forwardDetail and describe a study in the area of civil engineering that has one dependent variable and one independent variable that requires the use of correlation and regression.arrow_forwardThe trees can be applied to product concerns, but how can they be used ?arrow_forward
- Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,