Techware Incorporated is considering the introduc- tion of two new software products to the market. The company has four options regarding these products: introduce neither product, introduce product 1 only, introduce product 2 only, or introduce both products. Research and development costs for products 1 and 2 are $180,000 and $150,000, respectively. Note that the first option entails no costs because research and development efforts have not yet begun. The success of these software products depends on the national economy in the coming year. The company’s revenues, depending on its decision and the state of the economy, are given in the file P09_33.xlsx. The probabilities of a strong, fair, or weak economy in the coming year are assessed to be 0.10, 0.60, and 0.30, respectively. a. Use PrecisionTree to identify the strategy that maximizes Techware’s expected net revenue. b. Perform a sensitivity analysis on the optimal deci- sion, letting each of the inputs vary one at a time plus or minus 25% from its base value, and sum- marize your findings. Which of the inputs appears to have the largest effect on the best solution?
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.
Techware Incorporated is considering the introduc- tion of two new software products to the market. The company has four options regarding these products: introduce neither product, introduce product 1 only, introduce product 2 only, or introduce both products.
Research and development costs for products 1 and 2 are $180,000 and $150,000, respectively. Note that the first option entails no costs because research and development efforts have not yet begun. The success of these software products depends on the national economy in the coming year. The company’s revenues, depending on its decision and the state of the economy, are given in the file P09_33.xlsx. The probabilities of a strong, fair, or weak economy in the coming year are assessed to be 0.10, 0.60, and 0.30, respectively.
a. Use PrecisionTree to identify the strategy that maximizes Techware’s expected net revenue.
b. Perform a sensitivity analysis on the optimal deci- sion, letting each of the inputs vary one at a time plus or minus 25% from its base value, and sum- marize your findings. Which of the inputs appears to have the largest effect on the best solution?
P09_33.xlsx is attached as a screenshot
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