WZ Inc. is an event planning and promotion company who organizes events of different sizes for their clients. Planning and managing events have more than their fair share of frustrations and stressors. From last-minute changes to procrastinating clients, the profession isn’t for the faint of heart. Luckily, executing a successful event makes everything else (like the crazy long hours) worth it. There is a major event planning project due in 8 weeks. The penalty for planning the event late is $14 000 per week, since any delay will cause the venue to open later than anticipated, and cost the client significant returns. If the company uses its inside event planner to complete the planning, it will have to pay them overtime for all work. WZ Inc. has estimated that it will cost $12 000 per week (wages and overhead), including late weeks, to have the event planners finish the job. WZ is also considering outsourcing the planning work to other event planning companies. A bid of $92 000 has been received for the completed event plan. Yet another option for completing the job is to conduct a joint planning by having a third party complete all the preliminary work at a cost of $56 000. WZ would then complete the rest of the planning at an estimated cost of $30 000.   WZ has estimated the following probabilities of completing the project within various time frames when using each of the three options. Those estimates are shown in the following table:

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...
icon
Related questions
icon
Concept explainers
Topic Video
Question
100%

2. WZ Inc. is an event planning and promotion company who organizes events of different sizes for their clients. Planning and managing events have more than their fair share of frustrations and stressors. From last-minute changes to procrastinating clients, the profession isn’t for the faint of heart. Luckily, executing a successful event makes everything else (like the crazy long hours) worth it. There is a major event planning project due in 8 weeks. The penalty for planning the event late is $14 000 per week, since any delay will cause the venue to open later than anticipated, and cost the client significant returns. If the company uses its inside event planner to complete the planning, it will have to pay them overtime for all work. WZ Inc. has estimated that it will cost $12 000 per week (wages and overhead), including late weeks, to have the event planners finish the job. WZ is also considering outsourcing the planning work to other event planning companies. A bid of $92 000 has been received for the completed event plan. Yet another option for completing the job is to conduct a joint planning by having a third party complete all the preliminary work at a cost of $56 000. WZ would then complete the rest of the planning at an estimated cost of $30 000.

 

WZ has estimated the following probabilities of completing the project within various time frames when using each of the three options. Those estimates are shown in the following table:

 

 

 

 

 

Probability of completing the planning

 

Alternatives

 

On Time

 

1 Week Late

 

2 Week Late

 

3 Week Late

 

Internal Planner

 

.4

 

.5

 

.1

 

-

 

Outsourcing

 

.2

 

.4

 

.3

 

.1

 

Joint Work

 

.1

 

.3

 

.4

 

.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

What is the best decision based on an expected monetary value criterion?

Expert Solution
steps

Step by step

Solved in 3 steps with 1 images

Blurred answer
Knowledge Booster
Inventory management
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Practical Management Science
Practical Management Science
Operations Management
ISBN:
9781337406659
Author:
WINSTON, Wayne L.
Publisher:
Cengage,
Operations Management
Operations Management
Operations Management
ISBN:
9781259667473
Author:
William J Stevenson
Publisher:
McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi…
Operations and Supply Chain Management (Mcgraw-hi…
Operations Management
ISBN:
9781259666100
Author:
F. Robert Jacobs, Richard B Chase
Publisher:
McGraw-Hill Education
Business in Action
Business in Action
Operations Management
ISBN:
9780135198100
Author:
BOVEE
Publisher:
PEARSON CO
Purchasing and Supply Chain Management
Purchasing and Supply Chain Management
Operations Management
ISBN:
9781285869681
Author:
Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:
Cengage Learning
Production and Operations Analysis, Seventh Editi…
Production and Operations Analysis, Seventh Editi…
Operations Management
ISBN:
9781478623069
Author:
Steven Nahmias, Tava Lennon Olsen
Publisher:
Waveland Press, Inc.