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 michael porter''s competitive forces model, Discuss Michael Porter'...

Discuss Michael Porter's Competitive Forces Model. Provide examples to illustrate your points.

Formulate the problem of maximizing weekly profit, Problem: A leather c...

Problem: A leather company manufactures leather jackets and leather handbags. A leather jacket requires 8 square feet of leather, while a handbag requires 2 square feet. In ad

Explain what are the tradeoffs between profitability, What are the tradeoff...

What are the tradeoffs between profitability, risk, and control that should be considered when choosing between debt and equity?

Explain what is lori''s productivity, Lori produces "Final Exam Care Packag...

Lori produces "Final Exam Care Packages" for resale by her sorority. She is currently working a total of 5 hours per day to produce 100 care packages. a) What is Lori's productivit

Explain how training and education of work forces are differ, Explain how t...

Explain how the training and education of work force differ from that of the middle level managers. The training and education of work force differ from that of the middle le

Define effective sharing of knowledge within organization, Given the rate o...

Given the rate of technological change and global market pressures, there is considerable change and uncertainty in many organizations. Organizational value is determined more by

Explain what is the reorder point, Joe Henry's machine shop uses 2500 brack...

Joe Henry's machine shop uses 2500 brackets during the course of a year. these brackets are purchased from a supplier 90 miles away. The following information is known about the br

Find the feasible solution of transportation problem, Example: Find the fe...

Example: Find the feasible solution of  followings  transportation  problem by VAM and optimize  it by  stepping  stone methods. Availability  of Warehouse

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