Decision Tree 10. Company X has been unable to keep up with customer demands for product Y. They are con- sidering two options. The first is to replace the existing tooling machine with a new machine or start a second shift to increase throughput. The cost of the new machine is $500,000. The cost of ramping up the second shift is $150,000. With the new machine option, there is a 60 percent opportunity of generating 750,000 in revenue. There is also a 40 percent opportunity of making $200 in revenue. With the second-shift option, there is a 50 percent opportunity to generate $400,000 of revenue and a 50 percent opportunity to generate $100,000 of rev- enue. Which option would you recommend?

Decision Tree 10. Company X has been unable to keep up with customer demands for product Y. They are con- sidering two options. The first is to replace the existing tooling machine with a new machine or start a second shift to increase throughput. The cost of the new machine is $500,000. The cost of ramping up the second shift is $150,000. With the new machine option, there is a 60 percent opportunity of generating 750,000 in revenue. There is also a 40 percent opportunity of making $200 in revenue. With the second-shift option, there is a 50 percent opportunity to generate $400,000 of revenue and a 50 percent opportunity to generate $100,000 of rev- enue. Which option would you recommend?

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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