1.What is the expected monetary value of choosing the Group Technology option? 2.What is the expected monetary value of choosing the Batchoption? 3What is the BEST decision based on expected monetary value? Group of answer choices Group Technology Batch None, as all options have a negative payoff! Custom
XYZ Manufaturing company has hired a new VP (D.A.King) for managing capacity investment decisions. Mr. King reviews the situation after he comes on board and decides that he can invest in Batch manufacturing, Custom manufacturing or Group technology. Mr. King will not be able to forecast demand accurately till after the technology choices are made. Demand will be classified into four scenarios: poor, fair, good and excellent. The table below indicates the payoffs for each combination of technology choice and demand scenario.
|
|
POOR |
FAIR |
GOOD |
EXCELLENT |
|
PROBABILITY |
0.1 |
0.4 |
0.3 |
0.2 |
|
Batch |
- $200,000 |
$1,000,000 |
$1,200,000 |
$1,300,000 |
|
Custom |
$100,000 |
$300,000 |
$700,000 |
$800,000 |
|
Group Technology |
- $1,000,000 |
-$500,000 |
$500,000 |
$2,000,000 |
1.What is the
2.What is the expected monetary value of choosing the Batchoption?
3What is the BEST decision based on expected monetary value?
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