Reference no: EM13898934

K's Brewery is evaluating where to locate another brewery. Furthermore, the management of K's brewery is contemplating if the currently planned additional capacity is sufficient (or too much). The plans include a capacity for Zwickau of 1250, 1500 or 1700 (in 1000 cases), and for Magdeburg 1500, 1700, or 2200. If capacity and demand do not match, the following happens: if capacity is above demand, the brewery will brew just according to demand; if capacity is below demand, K's brewery needs to subcontract, which incurs subcontracting costs.Depending on the size of the new facility, productions costs per 1000 cases will change also (due to increased or decreased economies of scale). The Part2 input data file includes all relevant information. . The probability for a good economy is estimated at 0.3, for a medium economy also at 0.3 and 0.4 for a bad economy. A case of beer sells for Euro4. Determine which location should be chosen, and which size. Discuss your findings.

Hints: You need to calculate aggregated costs (i.e. totaled for aggregated production and then profits for the three different sizes of each facility, and for each economic state of nature.