Decision based on an expected monetary value criterion

Assignment Help Operation Management

Reference no: EM1392197

The product design group of Flores Electric Supplies, Inc., has determined that it needs to design a new series of switches. It must decide on one of three design strategies. The market forecast is for 200,000 units. The better and more sophisticated the design strategy and the more time spent on value engineering, the less will be the variable cost. The chief of engineering design, Dr. W. L. Berry, has decided that the following costs are a good estimate of the initial and variable costs connected with each of the three strategies:

a. Low-tech: A low-technology, low cost process consisting of hiring several new junior engineers. This option has a fixed cost of $45,000 and variable-cost probabilities of .3 for $.55 each, .4 for $.50, and .3 for $.45.

b. Subcontract: A medium-cost approach using a good outside design staff. This approach would have a fixed cost of $65,000 and a variable-cost probabilities of .7 of $.45, .2 of $.40, and .1 of $.35.

c. High-tech: A high-technology approach using the very best of the inside staff and the latest computer-aided design technology. This approach has a fixed coast of $75,000 and a variable-cost probabilities of .9 of $.40 and .1 of $.35.

What is the best decision based on an expected monetary value criterion? (note:we want the lowest EMV, since dealing with costs.)

Reference no: EM1392197

Questions Cloud

Determine the biggest organizational managerial mistake : Determine the biggest organizational managerial mistake you have seen or read about and determine how this mistake affected the organization.

Some people argue that the matrix structure : Some people argue that the matrix structure should be adopted only as a last resort because dual chains of command can create more problems that they solve

Determine how a policy will change social welfare : Determine how a policy will change social welfare, changes in individual utility for high-income individuals are weighted more heavily.

Estimate required stock solution : Make 200 ml of 1 percent NaCl using a 10 percent stock solution of NaCl. How much stock solution is needed? How much water is needed?

Decision based on an expected monetary value criterion : What is the best decision based on an expected monetary value criterion, The product design group of Flores Electric Supplies, Inc., has determined that it needs to design a new series of switches. It must decide on one of three design strategies

Information about percentile of normal distribution : Engineers want to design seats in commercial aircraft so that they are wide enough to fit 98% of all males. (Accommodating 100% of males would require very wide seats that would be too expensive.)

Characteristic during the sampling process : What characteristic (or property of random samples) could be observed during the sampling process?

Discuss the main steps in triggering angiogenesis by vegf : Discuss the main steps which involves in triggering Angiogenesis by VEGF. Provide few examples of angiogenesis inhibitors.

Choice of statistical method : Suppose that you're charged with comparing results of standardized tests from four different school districts. What statistical technique would you choose to use?

User Account

All Pages