a. Which location, A or B, should be chosen on the basis of the total weighted score? b. If the factors were weighted equally, would the choice change?
a. Which location, A or B, should be chosen on the basis of the total weighted score? b. If the factors were weighted equally, would the choice change?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Question
This is about Operations Management problems.
I want to know these problem's solutions. (No. 14- 19)
I attached images of those
Thank you.
![15:58
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AA E
46
SUPPLEMENT A
DECISION MAKING
selling price of the item is $10 per unit, and the annual
sales volume is 30,000 units.
year's budgeting process. That forecast calls for
Tri-County customers to consume 1 million MWh of
energy next year.
a. Techno can substantially improve the item's quality by
installing new equipment at additional annual fixed
costs of $60,000. Variable costs per unit would increase
by $1, but, as more of the better-quality product could
be sold, the annual volume would increase to 50,000
units. Should Techno buy the new equipment and
maintain the current price of the item? Why or why not?
a. How much will Tri-County need to charge its
customers per MWh to break even next year?
b. The Tri-County customers balk at that price and
conserve electrical energy. Only 95 percent of fore-
casted demand materializes. What is the resulting
surplus or loss for this nonprofit organization?
b. Alternatively, Techno could increase the selling price
to $11 per unit. However, the annual sales volume
would be limited to 45,000 units. Should Techno buy
the new equipment and raise the price of the item?
Why or why not?
10. Earthquake, drought, fire, economic famine, flood, and a
pestilence of TV court reporters have caused an exodus
from the City of Angels to Boulder, Colorado. The sud-
den increase in demand is straining the capacity of Boul-
der's electrical system. Boulder's alternatives have been
reduced to buying 150,000 MWh of electric power from
Tri-County G&T at a price of $75 per MWh, or refurbish-
ing and recommissioning the abandoned Pearl Street
Power Station in downtown Boulder. Fixed costs of
that project are $10 million per year, and variable costs
would be $35 per MWh. Should Boulder build or buy?
9. The Tri-County Generation and Transmission Associa-
tion is a nonprofit cooperative organization that pro-
vides electrical service to rural customers. Based on a
faulty long-range demand forecast, Tri-County overbuilt
its generation and distribution system. Tri-County now
has much more capacity than it needs to serve its cus-
tomers. Fixed costs, mostly debt service on investment
in plant and equipment, are $82.5 million per year.
Variable costs, mostly fossil fuel costs, are $25 per
megawatt-hour (MWh, or million watts of power used
for 1 hour). The new person in charge of demand fore-
casting prepared a short-range forecast for use in next
11. Tri-County G&T sells 150,000 MWh per year of electrical
power to Boulder at $75 per MWh, has fixed costs of
$82.5 million per year, and has variable costs of $25 per
MWh. If Tri-County has 1,000,000 MWh of demand from
its customers (other than Boulder), what will Tri-County
have to charge to break even?
Preference Matrix
12. The Forsite Company is screening three ideas for new
services. Resource constraints allow only one idea to be
commercialized at the present time. The following esti-
mates have been made for the five performance criteria
that management believes to be most important:
criterion 2. No more than two new suppliers are required
but each new vendor must exceed a total score of 70 per-
cent of the maximum total points to be considered.
RATING
Performance
Vendor Vendor Vendor Vendor Vendor
RATING
Criterion
A
B
C
E
Performance Criterion
Service A
Service B
Service C
Quality of raw material
8
7
3
9.
Capital equipment
investment required
0.6
0.8
0.3
Environmental impact
3
8
4
7
7
Responsiveness to
order changes
9.
7
6
5
Expected return on
investment (ROI)
0.7
0.3
0.9
Cost of raw material
7
6
9
2
7
Compatibility with current
0.4
0.7
0.5
workforce skills
a. Which new vendors do you recommend?
Competitive advantage
1.0
0.4
0.6
b. Would your decision change if the criteria were con-
sidered equally important?
Compatibility with EPA
requirements
0.2
1.0
0.5
14. Accel Express, Inc. collected the following information
on where to locate a warehouse (1 =poor, 10=excellent):
a. Calculate a total weighted score for each alternative. Use
a preference matrix and assume equal weights for each
performance criterion. Which alternative is best? Worst?
LOCATION SCORE
Location Factor
Factor Weight
A
B
b. Suppose that the expected ROI is given twice the
weight assigned to each of the remaining criteria.
(The sum of weights should remain the same as in
part [a].) Does this modification affect the ranking of
the three potential services?
Construction costs
10
8
Utilities available
10
7
7
Business services
10
4
7
13. You are in charge of analyzing five new suppliers of an
important raw material and have been given the informa-
tion shown in the table (1=worst, 10= best). Management
has decided that criteria 2 and 3 are equally important and
that criteria 1 and 4 are each four times as important as
Real estate cost
20
7
4
Quality of life
20
4
8
Transportation
30
7
6
DECISION MAKING
SUPPLEMENT A
47
a. Which location, A or B, should be chosen on the
basis of the total weighted score?
RATING
Factor
Software Software Software
b. If the factors were weighted equally, would the
choice change?
Performance Criterion
Weight
A
B
Compatibility with current
systems
6
8
6
15. Janice Gould of Krebs Consulting is in the process of
making a recommendation to a client regarding the cor-
porate-wide purchase of an analytical software platform.
She has made the following estimates on management's
most important performance criteria and has rated three
Software packages across these criteria
Maintenance and support
10
5
8
Total cost
25
4
8
46 / 664
20](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0f85a464-1153-4eb8-981d-6db58f0704c9%2Fa4150a60-cd1c-4c62-ba3b-2a66d37097a2%2Fu3tdreb_processed.png&w=3840&q=75)
Transcribed Image Text:15:58
ull
1検索
AA E
46
SUPPLEMENT A
DECISION MAKING
selling price of the item is $10 per unit, and the annual
sales volume is 30,000 units.
year's budgeting process. That forecast calls for
Tri-County customers to consume 1 million MWh of
energy next year.
a. Techno can substantially improve the item's quality by
installing new equipment at additional annual fixed
costs of $60,000. Variable costs per unit would increase
by $1, but, as more of the better-quality product could
be sold, the annual volume would increase to 50,000
units. Should Techno buy the new equipment and
maintain the current price of the item? Why or why not?
a. How much will Tri-County need to charge its
customers per MWh to break even next year?
b. The Tri-County customers balk at that price and
conserve electrical energy. Only 95 percent of fore-
casted demand materializes. What is the resulting
surplus or loss for this nonprofit organization?
b. Alternatively, Techno could increase the selling price
to $11 per unit. However, the annual sales volume
would be limited to 45,000 units. Should Techno buy
the new equipment and raise the price of the item?
Why or why not?
10. Earthquake, drought, fire, economic famine, flood, and a
pestilence of TV court reporters have caused an exodus
from the City of Angels to Boulder, Colorado. The sud-
den increase in demand is straining the capacity of Boul-
der's electrical system. Boulder's alternatives have been
reduced to buying 150,000 MWh of electric power from
Tri-County G&T at a price of $75 per MWh, or refurbish-
ing and recommissioning the abandoned Pearl Street
Power Station in downtown Boulder. Fixed costs of
that project are $10 million per year, and variable costs
would be $35 per MWh. Should Boulder build or buy?
9. The Tri-County Generation and Transmission Associa-
tion is a nonprofit cooperative organization that pro-
vides electrical service to rural customers. Based on a
faulty long-range demand forecast, Tri-County overbuilt
its generation and distribution system. Tri-County now
has much more capacity than it needs to serve its cus-
tomers. Fixed costs, mostly debt service on investment
in plant and equipment, are $82.5 million per year.
Variable costs, mostly fossil fuel costs, are $25 per
megawatt-hour (MWh, or million watts of power used
for 1 hour). The new person in charge of demand fore-
casting prepared a short-range forecast for use in next
11. Tri-County G&T sells 150,000 MWh per year of electrical
power to Boulder at $75 per MWh, has fixed costs of
$82.5 million per year, and has variable costs of $25 per
MWh. If Tri-County has 1,000,000 MWh of demand from
its customers (other than Boulder), what will Tri-County
have to charge to break even?
Preference Matrix
12. The Forsite Company is screening three ideas for new
services. Resource constraints allow only one idea to be
commercialized at the present time. The following esti-
mates have been made for the five performance criteria
that management believes to be most important:
criterion 2. No more than two new suppliers are required
but each new vendor must exceed a total score of 70 per-
cent of the maximum total points to be considered.
RATING
Performance
Vendor Vendor Vendor Vendor Vendor
RATING
Criterion
A
B
C
E
Performance Criterion
Service A
Service B
Service C
Quality of raw material
8
7
3
9.
Capital equipment
investment required
0.6
0.8
0.3
Environmental impact
3
8
4
7
7
Responsiveness to
order changes
9.
7
6
5
Expected return on
investment (ROI)
0.7
0.3
0.9
Cost of raw material
7
6
9
2
7
Compatibility with current
0.4
0.7
0.5
workforce skills
a. Which new vendors do you recommend?
Competitive advantage
1.0
0.4
0.6
b. Would your decision change if the criteria were con-
sidered equally important?
Compatibility with EPA
requirements
0.2
1.0
0.5
14. Accel Express, Inc. collected the following information
on where to locate a warehouse (1 =poor, 10=excellent):
a. Calculate a total weighted score for each alternative. Use
a preference matrix and assume equal weights for each
performance criterion. Which alternative is best? Worst?
LOCATION SCORE
Location Factor
Factor Weight
A
B
b. Suppose that the expected ROI is given twice the
weight assigned to each of the remaining criteria.
(The sum of weights should remain the same as in
part [a].) Does this modification affect the ranking of
the three potential services?
Construction costs
10
8
Utilities available
10
7
7
Business services
10
4
7
13. You are in charge of analyzing five new suppliers of an
important raw material and have been given the informa-
tion shown in the table (1=worst, 10= best). Management
has decided that criteria 2 and 3 are equally important and
that criteria 1 and 4 are each four times as important as
Real estate cost
20
7
4
Quality of life
20
4
8
Transportation
30
7
6
DECISION MAKING
SUPPLEMENT A
47
a. Which location, A or B, should be chosen on the
basis of the total weighted score?
RATING
Factor
Software Software Software
b. If the factors were weighted equally, would the
choice change?
Performance Criterion
Weight
A
B
Compatibility with current
systems
6
8
6
15. Janice Gould of Krebs Consulting is in the process of
making a recommendation to a client regarding the cor-
porate-wide purchase of an analytical software platform.
She has made the following estimates on management's
most important performance criteria and has rated three
Software packages across these criteria
Maintenance and support
10
5
8
Total cost
25
4
8
46 / 664
20
Transcribed Image Text:15:58
ull
|検索
Q AA R
DECISION MAKING
SUPPLEMENT A
47
a. Which location, A or B, should be chosen on the
basis of the total weighted score?
RATING
Factor
Software Software Software
b. If the factors were weighted equally, would the
choice change?
Performance Criterion
Weight
A
15. Janice Gould of Krebs Consulting is in the process of
making a recommendation to a client regarding the cor-
porate-wide purchase of an analytical software platform.
She has made the following estimates on management's
most important performance criteria and has rated three
Software packages across these criteria.
Compatibility with current
systems
6
8
Maintenance and support
10
8
Total cost
25
4
8
5
Speed of implementation
10
8
4
7
RATING
a. Which software platform would you recommend?
Factor
Software Software Software
b. Assume that the client changes their mind and now
argues that the maintenance and support criterion is
already accounted for by the total cost criterion. Fur-
ther, the client asks Ms. Gould to drop maintenance
and support and add its factor weight to total cost.
Will this client request alter the recommendation?
Performance Criterion
Weight
A
B
Functionality
25
9
8
9
Vendor reliability
10
7
5
9
Decision Theory
16. Build-Rite Construction has received favorable publicity
from guest appearances on a public TV home improve-
ment program. Public TV programming decisions seem to
be unpredictable, so Build-Rite cannot estimate the prob
ability of continued benefits from its relationship with
the show. Demand for home improvements next year may
be either low or high. But Build-Rite must decide now
whether to hire more employees, do nothing, or develop
subcontracts with other home improvement contractors.
Build-Rite has developed the following payoff table:
Which alternative is best, according to each of the
following decision criteria?
а. Махimin
b. Maximax
c. Laplace
d. Minimax regret
18. Benjamin Moses, chief engineer of Offshore Chemicals,
Inc., must decide whether to build a new processing
facility based on an experimental technology. If the new
facility works, the company will realize a net profit of
$20 million. If the new facility fails, the company will
lose $10 million. Benjamin's best guess is that there is a
40 percent chance that the new facility will work.
What decision should Benjamin Moses make?
DEMAND FOR HOME IMPROVEMENTS
Alternative
Low
Moderate
High
Hire
($250,000)
$100,000
$625,000
19. A manager is trying to decide whether to build a small,
medium, or large facility. Demand can be low, average,
or high, with the estimated probabilities being 0.25,
0.40, and 0.35, respectively.
A small facility is expected to earn an after-tax net
present value of just $18,000 if demand is low. If demand
is average, the small facility is expected to earn $75,000;
it can be increased to medium size to earn a net present
value of $60,000. If demand is high, the small facility is
expected to earn $75,000 and can be expanded to medium
size to earn $60,000 or to large size to earn $125,000.
Subcontract
$100,000
$150,000
$415,000
Do nothing
$50,000
$80,000
$300,000
Which alternative is best, according to each of the
following decision criteria?
a. Maximin
b. Maximax
c. Laplace
d. Minimax regret
17. Robert Ragsdale is trying to decide if he should purchase
repair and replacement insurance on a new laptop com-
puter that he is planning to purchase. The policy costs
$400.00 at the time of purchase, and over the next 3
years will replace the laptop if it is stolen or repair it if it
is broken. The following table contains the total costs of
A medium-sized facility is expected to lose an
estimated $25,000 if demand is low and earn $140,000
if demand is average. If demand is high, the medium-
sized facility is expected to earn a net present value of
$150,000; it can be expanded to a large size for a net
payoff of $145,000.
If a large facility is built and demand is high, earnings
are expected to be $220,000. If demand is average for the
large facility, the present value is expected to be $125,000;
if demand is low, the facility is expected to lose $60,000.
this decision.
Computer
Neither Breaks
Computer Computer
Is Stolen
Which alternative is best, according to each of the
following decision criterion?
Alternative
Breaks
Nor Is Stolen
Buy the Insurance
$2,900.00 $2,900.00
$2,900.00
a. Maximin
b. Maximax
c. Minimax regret
Do Not Buy the Insurance
$5,000.00 $3,100.00
$2,500.00
48
SUPPLEMENT A
DECISION MAKING
Decision Trees
20. Draw a decision tree for the three options described in
problem 19. What should management do to achieve the
highest expected payoff?
21. The owner of Pearl Automotive Dealers is trying to
decide whether to expand his current facility. If he
expands and customer demand turns weak, there is a
chance he could lease part of his newly constructed facil-
ity to another dealer. If he doesn't expand and strong
demand occurs, he could attempt to lease another facil-
itv across town. Analvze the decision tree in Figure A8.
23. A manager is trying to decide whether to buy one
machine or two. If only one is purchased and demand
proves to be excessive, the second machine can be pur-
chased later. Some sales will be lost, however, because
the lead time for producing this type of machine is six
months. In addition, the cost per machine will be lower
if both are purchased at the same time. The probability
of low demand is estimated to be 0.20. The after-tax
net present value of the benefits from purchasing the
two machines together is $90,000 if demand is low and
47 / 664
20
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