Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
17th Edition
ISBN: 9780134870069
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
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Chapter 12, Problem 7P
To determine

Calculate the expected annual cost.

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Kipling Equipment Inc. must decide to produce either a face mask or a face shield to alleviate the spread of a quickly evolving coronavirus. The face mask is disposable and developing it could potentially lead to a profit of $230,000 if competition is high or a profit of $515,000 if competition is low. The face shield, on the other hand, is reusable and has the potential of generating a fixed profit of $438,000 irrespective of high or low competition. The probability of high competition is 43% while that of low competition is 57%. Part A a) What is the expected monetary value of the optimal decision? $ b) Based on expected monetary value, what should the Kipling do? Select an answer c) What is the upper bound on the amount Kipling should pay for additional information? $
please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearly
In preparing for the upcoming holiday season, Fresh Toy Company (FTC) designed a new doll called The Dougie that teaches children how to dance. The fixed cost to produce the doll is $100,000. The variable cost, which includes material, labor, and shipping costs, is $34 per doll. During the holiday selling season, FTC will sell the dolls for $42 each. If FTC overproduces the dolls, the excess dolls will be sold in January through a distributor who has agreed to pay FTC $10 per doll. Demand for new toys during the holiday selling season is extremely uncertain. Forecasts are for expected sales of 60,000 dolls with a standard deviation of 15,000. The normal probability distribution is assumed to be a good description of the demand. FTC has tentatively decided to produce 60,000 units (the same as average demand), but it wants to conduct an analysis regarding this production quantity before finalizing the decision. (a) Create a what-if spreadsheet model using a formula that relates the…
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