Reference no: EM131275482
Zhu Manufacturing is considering the introduction of a family of new products.? Long-term demand for the product group is somewhat? predictable, so the manufacturer must be concerned with the risk of choosing a process that is inappropriate. Faye Zhu is VP of operations. She can choose among batch manufacturing or custom?manufacturing, or she can invest in group technology. Zhu? won't be able to forecast demand accurately until after she makes the process choice. Demand will be classified into four? compartments: poor,? fair, good, and excellent. The table below indicates the payoffs? (profits) associated with each? process/demand combination, as well as the probabilities of each? long-term demand? level:
Poor Fair Good Excellent
Probability 0.10 0.40 0.25 0.25
Batch -$200,000 $1,000,000 $1,400,000 $1,300,000
Custom $200,000 $400,000 $650,000 $700,000
Group technology -$1,000,000 -$600,000 $18,000 $2,100,000
a) The alternative that provides Zhu the greatest expected monetary value ?(EMV?) is BATCH
b) The EMV for this decision is ??(enter your answer as a whole? number).
?c) The amount that Faye Zhu would be willing to pay for a forecast that would accurately determine the level of demand in the future? = ??(enter your answer as a whole? number).
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