OPERATIONS MANAGEMENT LL PACKAGE
11th Edition
ISBN: 9781323592632
Author: KRAJEWSKI
Publisher: Pearson Custom Publishing
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Concept explainers
Question
Chapter A, Problem 24P
a
Summary Introduction
Interpretation: Decision tree
Concept Introduction: Decision tree is a pictorial representation showing attributes of an outcome. It extends from nodes to different branches showing a series of probability.
b
Summary Introduction
Interpretation:Activity of management to achieve the highest payoff.
Concept Introduction: Probability of an event is how likely or how possibly an event take place. It shows an outcome of event which ranges between 0 and 1.
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A manufacturing plant has reached full capacity. The company must build a second plant—either small or large—at a nearby location. The demand is likely to be high or low. The probability of low demand is 0.3. If demand is low, the large plant has a present value of $5 million and the small plant, apresent value of $8 million. If demand is high, the large plant pays off with a present value of $18 million, and the small plant with a present value of only $10 million. However, the small plant can be expanded later if demand proves to be high for a present value of $14 million.a. Draw a decision tree for this problem.b. What should management do to achieve the highest expected payoff?
A manufacturing plant has reached full capacity. The company must build a second plant—eithersmall or large—at a nearby location. The demand is likely to be high or low. The probability of low demand is 0.4. If demand is low, the large plant has a present value of $6 million and the small plant, $9 million. If demand is high, the large plant pays off with a present value of $20 million and the small plant with a present value of only $11 million. However, the small plant can be expanded later if demand proves to be high, for a present value of $13 million.
The Hard to Beat Bakery is deciding whether to buy or repair an existing oven thatthey have been using for over 8 years. If they elect to repair, it will cost the entity$950,000 and either of two outcomes is likely:
1. A 20% probability it will perform okay and generate revenues of$10,000,000, or
2. An 80% chance that it will be partially restored and generate revenue of$2,000,000.
If on the other hand however, they purchase a new oven, they can either buy animported oven for $3,500,000 or they can buy a locally made one for $2,200,000.If the elect to purchase the imported oven, production will earn them revenues of$15,550,000, but if they buy the locally made oven, there is a 70% likelihood thatit perform as expected and generate revenues of $12,000,000; and a 30% chancethat it will not and generate revenues of $6,000,000.
Required:
1. Draw a decision tree of this problem and determine the expected value.2. Advise the management of the Bakery on how to proceed.3. Briefly discuss the…
Chapter A Solutions
OPERATIONS MANAGEMENT LL PACKAGE
Ch. A - Mary Williams, owner of Williams Products, is...Ch. A - Prob. 2PCh. A - An interactive television service that costs $10...Ch. A - A restaurant is considering adding fresh brook...Ch. A - Spartan Castings must implement a manufacturing...Ch. A - A news clipping service is considering...Ch. A - Prob. 7PCh. A - Techno Corporation is currently manufacturing an...Ch. A - The Tri-County Generation and Transmission...Ch. A - Prob. 10P
Ch. A - Tri-County G&T sells 150,000 MWh per year of...Ch. A - The Forsite Company is screening three ideas for...Ch. A - Prob. 13PCh. A - Prob. 14PCh. A - Prob. 15PCh. A - Build-Rite Construction has received favorable...Ch. A - Prob. 17PCh. A - Prob. 18PCh. A - Prob. 19PCh. A - Prob. 20PCh. A - Prob. 21PCh. A - Prob. 22PCh. A - Prob. 23PCh. A - Prob. 24P
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