MacDonald Products, Inc., of Clarkson, New York, has the option of (a) proceeding immediately with production of a new top-of-the-line stereo TV that has just completed prototype testing or (b) having the value analysis team complete a study. If Ed Lusk, VP for operations, proceeds with the existing prototype (option a), the firm can expect sales to be 120,000 units at $580 each, with a probability of 0.41 and a 0.59 probability of 65,000 at $580. If, however, he uses the value analysis team (option b), the firm expects sales of 85,000 units at $730, with a probability of 0.71 and a 0.29 probability of 65,000 units at $730. Value engineering, at a cost of $90,000, is only used in option b. Which option has the highest expected monetary value (EMV)? The EMV for option a is $ and the EMV for option b is $ Therefore, option b has the highest expected monetary value. (Enter your responses as integers.)

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MacDonald Products, Inc., of Clarkson, New York, has the option of
(a) proceeding immediately with production of a new top-of-the-line stereo TV that has just completed prototype testing or
(b) having the value analysis team complete a study.
If Ed Lusk, VP for operations, proceeds with the existing prototype (option a), the firm can expect sales to be 120,000 units at
$580 each, with a probability of 0.41 and a 0.59 probability of 65,000 at $580. If, however, he uses the value analysis team (option
b), the firm expects sales of 85,000 units at $730, with a probability of 0.71 and a 0.29 probability of 65,000 units at $730. Value
engineering, at a cost of $90,000, is only used in option b. Which option has the highest expected monetary value (EMV)?
The EMV for option a is $
and the EMV for option b is $
Therefore, option b
has the highest expected monetary value.
(Enter your responses as integers.)
Transcribed Image Text:uestlon Help MacDonald Products, Inc., of Clarkson, New York, has the option of (a) proceeding immediately with production of a new top-of-the-line stereo TV that has just completed prototype testing or (b) having the value analysis team complete a study. If Ed Lusk, VP for operations, proceeds with the existing prototype (option a), the firm can expect sales to be 120,000 units at $580 each, with a probability of 0.41 and a 0.59 probability of 65,000 at $580. If, however, he uses the value analysis team (option b), the firm expects sales of 85,000 units at $730, with a probability of 0.71 and a 0.29 probability of 65,000 units at $730. Value engineering, at a cost of $90,000, is only used in option b. Which option has the highest expected monetary value (EMV)? The EMV for option a is $ and the EMV for option b is $ Therefore, option b has the highest expected monetary value. (Enter your responses as integers.)
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