Define decision base on an expected monetary value criterion, Operation Management

Assignment Help:

Page Engineering designs and constructs air conditioning and heating (HVAC) systems for hospitals and clinics. Currently the company's staff is overloaded with design work. There is a major design project due in 8 weeks. The penalty for completing the design late is $14,000 per week, since any delay will cause the facility to open later than anticipated, and cost the client significant revenue. If the company uses its inside engineers to complete the design, it will have to pay them overtime for all work. Page has estimated that it will cost $12,000 per week (wages and overhead), including late weeks, to have company engineers complete the design. Page is also considering having an outside engineering firm do the design. A bid of $92,000 has been received for the completed design. Yet another option for completing the design is to conduct a joint design by having a third engineering company complete all electromechanical components of the design at a cost of $56,600. Page would then complete the rest of the design and control systems at an estimated cost of $30,000.

Page has estimated the following probabilities of completing the project within various time frames when using each of the three options. Those estimates are shown in the following table:

Probability of Completing the Design

Option On-Time 1 wk. late 2 wks. Late 3 wks. Late

Internal Eng. 0.4 0.5 0.1 -------

External Eng. 0.2 0.4 0.3 0.1

Joint Design 0.1 0.3 0.4 0.2

What is the best decision based on an expected monetary value criterion?


Related Discussions:- Define decision base on an expected monetary value criterion

Explain how is job analysis performed in a company, 1. Compensation systems...

1. Compensation systems vary from company to company, but tend to be similar in design and overall cost within a specific industry. Why would you think this is so? 2. Why is a well

Explain make-or-buy in decision, Consider the make-or- buy in decision. Giv...

Consider the make-or- buy in decision. Give three examples of situations in which a business should make, rather than buy. Give three examples of situations in which a business sho

Opm, Transformation process

Transformation process

Describe delaying completion of the project, Using the data in Table 13-1, ...

Using the data in Table 13-1, what is the latest possible time that C may be started without delaying completion of the project? Table 13-1 The following represents a project with

Define the break-even point for each range, A manager must decide how many ...

A manager must decide how many machines of a certain type to purchase. Each machine can process 100 customers per day. One machine will result in a fixed cost of $2000 per day, whi

Operation functions of an organization, Operation functions of an Organizat...

Operation functions of an Organization Case study IKEA is the most successful furniture retailer ever. With 276 stores in 36 countries, it has managed to develop its own s

What the cafeteria should use, A cafeteria wants to introduce a new burger,...

A cafeteria wants to introduce a new burger, with bread and beef together weighing at least 1 ounce. The cafeteria manage also wants the new burger to meet a new nutrition standard

Explain executive team off-site meeting, Deliverable Length: 10-12 slides, ...

Deliverable Length: 10-12 slides, with presenter notes Details: You are an OD consultant for the Working Better Group. The President of a firm, BARTH Inc., requested a meeting w

Explain what is meant by uniformly distributed, What is meant when a variab...

What is meant when a variable, like the possible selling prices for a new item like a mouse pad, is said to be uniformly distributed?

Explain a production manager at a contour manufacturing, A production manag...

A production manager at a Contour Manufacturing plant has inspected the number of defective plastic molds in five random samples of 30 observations each. Following are the number o

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd