A manager must decide how many machines of a certain type to buy. The machines will be used to manufacture a new gear for which there is increased demand. The manager has narrowed the decision to two alternatives: buy one machine or buy two. If only one machine is purchased and demand is more than it can handle, a second machine can be purchased at a later time. However, the cost per machine would be lower if the two machines were purchased at the same time. The estimated probability of low demand is .30, and the estimated probability of high demand is .70. The net present value associated with the purchase of two machines initially is $77,900 if demand is low and $137,100 if demand is high. The net present value for one machine and low demand is $98,000. If demand is high, there are three options. One option is to do nothing, which would have a net present value of $119,680. A second option is to subcontract; that would have a net present value of $115,650. The third option is to purchase a second machine. This option would have a net present value of $123,540. a. What is the EMV (expected monetary value) for alternative buy one machine? The EMV is $. b. What is the EMV (expected monetary value) for alternative buy two machines? The EMV is $. c. How many machines should the manager purchase initially? The manager should purchase ( ) machine(s) initially.
Critical Path Method
The critical path is the longest succession of tasks that has to be successfully completed to conclude a project entirely. The tasks involved in the sequence are called critical activities, as any task getting delayed will result in the whole project getting delayed. To determine the time duration of a project, the critical path has to be identified. The critical path method or CPM is used by project managers to evaluate the least amount of time required to finish each task with the least amount of delay.
Cost Analysis
The entire idea of cost of production or definition of production cost is applied corresponding or we can say that it is related to investment or money cost. Money cost or investment refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factor of production or factor services.
Inventory Management
Inventory management is the process or system of handling all the goods that an organization owns. In simpler terms, inventory management deals with how a company orders, stores, and uses its goods.
Project Management
Project Management is all about management and optimum utilization of the resources in the best possible manner to develop the software as per the requirement of the client. Here the Project refers to the development of software to meet the end objective of the client by providing the required product or service within a specified Period of time and ensuring high quality. This can be done by managing all the available resources. In short, it can be defined as an application of knowledge, skills, tools, and techniques to meet the objective of the Project. It is the duty of a Project Manager to achieve the objective of the Project as per the specifications given by the client.
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A manager must decide how many machines of a certain type to buy. The machines will be used to manufacture a new gear for which there is increased demand. The manager has narrowed the decision to two alternatives: buy one machine or buy two. If only one machine is purchased and demand is more than it can handle, a second machine can be purchased at a later time. However, the cost per machine would be lower if the two machines were purchased at the same time. The estimated probability of low demand is .30, and the estimated probability of high demand is .70. The
net present value associated with the purchase of two machines initially is $77,900 if demand is low and $137,100 if demand is high. The net present value for one machine and low demand is $98,000. If demand is high, there are three options. One option is to do nothing, which would have a net present value of $119,680. A second option is to subcontract; that would have a net present value of $115,650. The third option is to purchase a second machine. This option would have a net present value of $123,540.
a. What is the EMV (expected monetary value) for alternative buy one machine? The EMV is $.
b. What is the EMV (expected monetary value) for alternative buy two machines? The EMV is $.
c. How many machines should the manager purchase initially? The manager should purchase ( ) machine(s) initially.
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