Principles Of Operations Management
11th Edition
ISBN: 9780135173930
Author: RENDER, Barry, HEIZER, Jay, Munson, Chuck
Publisher: Pearson,
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 7.S, Problem 32P
Summary Introduction
To determine: The option which has the highest expected monetary value.
Introduction:
Expected monetary value (EMV):
The expected monetary value is a figure which indicates how much returns can be possibly achieved by pursing an alternative. It will also define the likelihood of that particular outcome occurring.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
James Lawson's Bed and Breakfast, in a small historicMississippi town, must decide how to subdivide (remodel) the largeold home that will become its inn . There are three alternatives:Option A would modernize all baths and combine rooms, leavingthe inn with four suites, each suitable for two to four adults.Option B would modernize only the second floor; the results wouldbe six suites, four for two to four adults, two for two adults only.Option C (the status quo option) leaves all walls intact. In this case,there are eight rooms available, but only two are suitable for fouradults, and four rooms will not have private baths. The details ofprofit and demand patterns that will accompany each option are: Which option has the highest expected monetary value?
James Lawson’s Bed and Breakfast, in a small his-toric Mississippi town, must decide how to subdivide (remodel)
the large old home that will become its inn. There are threealternatives: Option A would modernize all baths and combinerooms, leaving the inn with four suites, each suitable for two tofour adults. Option B would modernize only the second floor; theresults would be six suites, four for two to four adults, two fortwo adults only. Option C (the status quo option) leaves all wallsintact. In this case, there are eight rooms available, but only twoare suitable for four adults, and four rooms will not have privatebaths. Below are the details of profit and demand patterns thatwill accompany each option:
ANNUAL PROFIT UNDERVARIOUS DEMAND PATTERNSALTERNATIVES HIGH P AVERAGE PA (modernize all) $90,000 .5 $25,000 .5B (modernize 2nd) $80,000 .4 $70,000 .6C (status quo) $60,000 .3 $55,000 .7Which option has the highest expected monetary value?
Sarah is a designer, but her passion is to paint. To pursue her passion Sarah would like to have an exhibition of her art work for a week. She contacts four landlords with a proposal of renting their places for a week and to her surprise all 4 accept the idea. Characteristics of each location are as follows:
Sarah wants to know if people like her paintings enough to buy them. Decision objectives:1- Space not less than 600ft2.2- Location3- Decoration4- Facilities5- Overall budget including rent for one week not to exceed $300
Which store is Sarah going to choose for her art exhibition? Explain your chain of thoughts and the process.
Chapter 7 Solutions
Principles Of Operations Management
Ch. 7.S - Prob. 1DQCh. 7.S - Prob. 2DQCh. 7.S - Prob. 3DQCh. 7.S - Prob. 4DQCh. 7.S - Prob. 5DQCh. 7.S - Distinguish between bottleneck time and throughput...Ch. 7.S - Prob. 7DQCh. 7.S - Prob. 8DQCh. 7.S - Prob. 9DQCh. 7.S - Prob. 10DQ
Ch. 7.S - Prob. 11DQCh. 7.S - Prob. 12DQCh. 7.S - What are the techniques available to operations...Ch. 7.S - Amy Xias plant was designed to produce 7,000...Ch. 7.S - For the post month, the plant in Problem S7.1,...Ch. 7.S - Prob. 3PCh. 7.S - Prob. 4PCh. 7.S - Prob. 5PCh. 7.S - The effective capacity and efficiency for the next...Ch. 7.S - Southeastern Oklahoma State Universitys business...Ch. 7.S - Prob. 8PCh. 7.S - Prob. 9PCh. 7.S - Prob. 10PCh. 7.S - The three-station work cell illustrated in Figure...Ch. 7.S - The three-station work cell at Pullman Mfg., Inc....Ch. 7.S - The Pullman Mfg., Inc., three-station work cell...Ch. 7.S - Prob. 14PCh. 7.S - 10 minutes per unit. Part 2 is simultaneously...Ch. 7.S - Prob. 16PCh. 7.S - Prob. 17PCh. 7.S - Using the data in Problem S7.17: a) What is the...Ch. 7.S - Prob. 19PCh. 7.S - Prob. 20PCh. 7.S - Prob. 21PCh. 7.S - Prob. 22PCh. 7.S - Prob. 23PCh. 7.S - Prob. 24PCh. 7.S - Prob. 25PCh. 7.S - Prob. 26PCh. 7.S - Prob. 27PCh. 7.S - Prob. 28PCh. 7.S - Prob. 29PCh. 7.S - Prob. 30PCh. 7.S - Prob. 31PCh. 7.S - Prob. 32PCh. 7.S - Prob. 33PCh. 7.S - Prob. 34PCh. 7.S - Prob. 35PCh. 7.S - Prob. 36PCh. 7.S - Prob. 37PCh. 7.S - Prob. 38PCh. 7.S - Prob. 39PCh. 7.S - Prob. 40PCh. 7.S - Prob. 41PCh. 7.S - Prob. 42PCh. 7.S - Prob. 43PCh. 7.S - Prob. 44PCh. 7.S - Prob. 45PCh. 7.S - Prob. 1VCCh. 7.S - a capacity expansion plan and a new 11-story...Ch. 7.S - a capacity expansion plan and a new 11-story...Ch. 7 - Ethical Dilemma For the sake of efficiency and...Ch. 7 - Prob. 1DQCh. 7 - Prob. 2DQCh. 7 - Prob. 3DQCh. 7 - Prob. 4DQCh. 7 - Prob. 5DQCh. 7 - Prob. 6DQCh. 7 - Prob. 7DQCh. 7 - Prob. 8DQCh. 7 - Prob. 9DQCh. 7 - Prob. 10DQCh. 7 - Prob. 11DQCh. 7 - Prob. 12DQCh. 7 - Prob. 13DQCh. 7 - Prob. 14DQCh. 7 - Prob. 15DQCh. 7 - Prob. 16DQCh. 7 - Prob. 17DQCh. 7 - Prob. 18DQCh. 7 - Prob. 19DQCh. 7 - Prob. 1PCh. 7 - Usingthedatain Problem 7.1, determinethemost...Ch. 7 - Prob. 3PCh. 7 - Refer to Problem 7.1. If a contract for the second...Ch. 7 - Stan Fawcetts company is considering producing a...Ch. 7 - Prob. 6PCh. 7 - Prob. 7PCh. 7 - Prob. 8PCh. 7 - Metters Cabinets, Inc., needs to choose a...Ch. 7 - Prob. 10PCh. 7 - Nagle Electric. Inc., of Lincoln, Nebraska, must...Ch. 7 - Stapleton Manufacturing intends to increase...Ch. 7 - Prepare a flowchart for one of the following: a)...Ch. 7 - Prepare a process chart for one of the activities...Ch. 7 - Prob. 15PCh. 7 - Prob. 16PCh. 7 - Prob. 17PCh. 7 - Prob. 1CSCh. 7 - Prob. 2CSCh. 7 - Prob. 3CSCh. 7 - Process Strategy at Wheeled Coach Wheeled Coach,...Ch. 7 - Prob. 1.2VCCh. 7 - Prob. 1.3VCCh. 7 - Prob. 1.4VCCh. 7 - Alaska Airlines: 20-Minute Baggage...Ch. 7 - Prob. 2.2VCCh. 7 - Prob. 2.3VCCh. 7 - Prob. 2.4VCCh. 7 - Prob. 2.5VCCh. 7 - Prob. 3.1VCCh. 7 - Prob. 3.2VCCh. 7 - Prob. 3.3VCCh. 7 - Prob. 3.4VC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.Similar questions
- Sarah has a startup business that makes two distinct bird feeders that she has designed. Sarah is planning on operating a small factory to build the bird feeders. She is looking at two possible locations, A and B. If she chooses location A, the lease on the building will be higher than location B, thus leading to higher fixed costs than what she would have with location B. However, if she makes more than 20,000 units, both locations will likely have to be expanded, both the physical buildings and the manufacturing equipment. Variable costs to produce each unit will vary by location as well as by product. For example, the first design will have variable costs of $10 and $15 in locations A and B respectively, while the second bird feeder design will have variable costs of $20 and $25 respectively depending on location. However, she thinks that variable costs will decrease if she sells more than 5,000 units, as she will receive discounts from her suppliers at that point. She is unsure of…arrow_forwardPlease create an objective true using these two solutions. Solution1 - More accommodation/residence should be built in the airport itself as it would allow Pascal to save a lot of time consumed while reaching the airport from his house. He would stay in the built-in residence only during his workdays and in his house on the weekend. It will also allow many passengers to stay if their flights get postponed/canceled due to any reason. Solution 2 - If a prayer room/area is built in the airport itself, it will allow Rajput and other diverse travelers and people who work in the airport to complete their prayer in its proper time. Rajput could complete that specific prayer between the time after he checks in his luggage and the boarding time. PLEASE FOLLOW THESE REQUIRMENTS ASWELL OTHERWISE QUESTION WILL BE MARKED INCOMPLETE: Three levels of objectives are included. At the 1st-level, three or more objectives are included. Each 1st-level objective is broken into two or more 2nd-level…arrow_forwardMick Karra is the manager of MCZ Drilling products which produces a variety of especially valves for oil field equipment. Recent activity in the oil fields has cause demand to increase drastically, and a decision has been made to open a new manufacturing facility. Three locations are being considered, and the size of the facility would not be the same in each location Thus, overtime might be necessary at times. The following table gives the total monthly cost (in 1000s) for each possible location under each demand possibility. The probabilities for the demand levels have been determined to be 20% for low demand, 30% for medium demand, and 50% for high demand Demand is Low Demand is medium Demand is High Ardmore, OK 85 110 150 Sweetwater, TX 90 100 120 Lake Charles, LA 110 120 130 which location would minimize the expected opportunity loss?arrow_forward
- Mick Karra is the manager of MCZ Drilling products which produces a variety of especially valves for oil field equipment. Recent activity in the oil fields has cause demand to increase drastically, and a decision has been made to open a new manufacturing facility. Three locations are being considered, and the size of the facility would not be the same in each location Thus, overtime might be necessary at times. The following table gives the total monthly cost (in 1000s) for each possible location under each demand possibility. The probabilities for the demand levels have been determined to be 20% for low demand, 30% for medium demand, and 50% for high demand Demand is Low Demand is medium Demand is High Ardmore, OK 85 110 150 Sweetwater, TX 90 100 120 Lake Charles, LA 110 120 130 which location should be selected to minimize the expected cost of operation? How much is a perfect forecast of the demand worth? which location would…arrow_forwardMick Karra is the manager of MCZ Drilling products which produces a variety of especially valves for oil field equipment. Recent activity in the oil fields has cause demand to increase drastically, and a decision has been made to open a new manufacturing facility. Three locations are being considered, and the size of the facility would not be the same in each location Thus, overtime might be necessary at times. The following table gives the total monthly cost (in 1000s) for each possible location under each demand possibility. The probabilities for the demand levels have been determined to be 20% for low demand, 30% for medium demand, and 50% for high demand Demand is Low Demand is medium Demand is High Ardmore, OK 85 110 150 Sweetwater, TX 90 100 120 Lake Charles, LA 110 120 130 How much is a perfect forecast of the demand worth?arrow_forward14. Stephanie, the supply chain analyst of Nestle is asked to present an expansion plan for thecompany. The plan is either to construct a plant, open a distribution center, or do nothing. Fromthe plant construction, the company will gain 80,000Php if the market turns favorable, loss of10,000 if average, and loss of 50,000 if unfavorable. From opening a distribution center, thecompany will gain 40,000Php if favorable, gain 20,000Php if average, and loss of 30,000Php ifunfavorable. And if the decision is do nothing, the company will gain nothing regardless of themarket turnout. Then, he was able to determine further the probability of occurrence of eachtype of market. The probability of occurrence is 60%, 25%, and 40%, respectively. He also foundout that he can buy the information on what will really happen to the market for 2,000Php.a. What should be the analyst’s decision?b. How much gain or loss will he expect for the company?c. Should he buy the perfect information? Why or why not?d.…arrow_forward
- Mick Karra is the manager of MCZ Drilling Products, which produces a variety of specialty Valves for oil equipment. Recent activity in the oil fields has caused demand to increase drastically, and a decision has been made to open a new manufacturing facility. Three locations are being considered and the size of the facility would not be the same in each location. Thus, overtime might be necessary at times. The following table gives the total monthly cost (in $1,000s) for each possible location under each demand possibility. The probabilities for the demand levels have been determined to be 20% for low demand, 30% for medium demand, and 50% for high demand. Demand is low Demand is medium Demand is High Ardmore, Ok 85 110 150 Sweetwater, Tx 90 100 120 lake Charles, LA 110 120 130 (a) Which location would be selected based on the optimistic criterion?(b) Which location would be selected based on the pessimistic…arrow_forwardA firm that has recently experienced enormous growth is seeking to lease a small plant in Memphis,TN; Biloxi, MS; or Birmingham, AL. Prepare an economic analysis of the three locations given thefollowing information: Annual costs for building, equipment, and administration would be $40,000for Memphis, $60,000 for Biloxi, and $100,000 for Birmingham. Labor and materials are expected tobe $8 per unit in Memphis, $4 per unit in Biloxi, and $5 per unit in Birmingham. The Memphis location would increase system transportation costs by $50,000 per year, the Biloxi location by $60,000per year, and the Birmingham location by $25,000 per year. Expected annual volume is 10,000 units.arrow_forwardLorraine has received a lump sum of R500 000.00 from her retirement fund. She intends to usethese funds to start a student accommodation business. In order to start this business, Lorrainewould need approximately R1 million, funds are needed for building the students accommodationapartments and to register with various regulatory bodies. She has to source additional funding inorder to realise this dream. In the business plan, Lorraine has outlined the following:• Accommodation will be offered ONLY to students in Cape Town, Johannesburg,Mpumalanga and Polokwane.• ONLY females will be approved to reside in these houses, between the age of 18 - 35.• Marketing of the business will be done on community Radio stations only at the fourmentioned cities.• It is going to be a family business, Friends and relatives are in support of the idea but arenot able to support the business financially There are three types of Market coverage. Explain the type of market coverageapplicable to Lorraine’s…arrow_forward
- An investment company is considering the feasibility of building a large shopping complex in a residential area. The diagram below shows where the complex will be located. St James Town is located 15 minutes away from the city centre. It is a quiet town and the residents believe that the shopping complex will alter their environment. They have read in the newspapers that the complex will have a large entertainment sector with 14 theatres (cinemas), a bowling alley with 40 lines, a large eating plaza with 15 different fast food restaurants and a children's play park. It will also host a hypermarket (large supermarket) that will be open 24 hours a day, and 200 different retail outlets. The local government office is currently dealing with the complaints of a large number of residents. After a meeting with the residents the firm has agreed to look at the concerns and offered to examine ways of compensating for the inconveniences caused a- Suggest a list of at four complaints that the…arrow_forwardMark has just been fired as the college bookstore manager for setting prices too low (only 20 percent above suggested retail). He is considering opening a competing bookstore near the campus, and he has begun an analysis of the situation. There are two possible sites under consideration. One is relatively small, while the other is large. If he opens at Site 1 and demand is good, he will generate a profit of P50,000. If demand is low, he will lose 10,000. If he opens at Site 2 and demand is high, he will generate a profit of $80,000, but he will lose P30,000 if demand is low. He also has the option of not opening at either site. He believes that there is a 50 percent chance that demand will be high. A market research study will cost $5,000. The probability of a good demand given a favorable study is 0.8. The probability of a good demand given an unfavorable study is 0.1. There is a 60 percent chance that the study will be favorable. (a) Should Mark use the study? Why or why not? (b) If…arrow_forwardIn solving the given problem ,you may refer to the following payoff table: New bridge built No new bridge Alternative location A 1 14 for new warehouse B 2 10 C 4 6 1. Assume the payoffs represent profits. Determine the alternative that would be chosen under each of these decision criteria: A. Maximin B. Maximax C. Laplace 2. Using the information in the payoff table, develop a table of regrets, and then: A. Determine the alternative that would be chosen under minimax regret. B. Determine the expected value of perfect information using the regret table, assuming that the probability of a new bridge being built is 0.60. 3. Using the probabilities of 0.60 for a new bridge and 0.40 for no new bridge, compute the expected value for each alternative in the payoff table , and identify the alternative that would be selected under the expected-value approach. 4.…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,
Practical Management Science
Operations Management
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:Cengage,