Explanation Given information: Design Cost Probability Number of non-defective (out of 100) K1 $100,000.00 0.8 90 0.2 70 K2 $130,000.00 0.85 90 0.15 75 K3 $180,000.00 0.9 95 0.1 80 Number of sandwiches produced daily = 500 Cost of each sandwich = $1 .30 Selling price of each sandwich = $ 2 .50 Number of days of operation = 300 Calculation of EMV: Calculation of expected outcome and EMV: Design K1: Probability 0.80 = − $ 100 , 000 − ( 10 100 × 500 × 300 × $ 1.30 ) + ( 90 100 × 500 × 300 × $ 1.20 ) = − $ 100 , 000 − $ 19 , 500 + $ 162 , 000 = $ 42 , 500 The expected outcome is calculated by adding the cost for the design K1, $100,000, and the cost of 10 unsold sandwiches ($1.20), and then subtracting the resultant from the profit of 90 sandwiches sold ($2.50-$1.20=$1.30). The expected outcome is $42,500. Probability 0.20 = − $ 100 , 000 − ( 30 100 × 500 × 300 × $ 1.30 ) + ( 70 100 × 500 × 300 × $ 1.20 ) = − $ 100 , 000 − $ 58 , 500 + $ 126 , 000 = − $ 32 , 500 The expected outcome is calculated by adding the cost for the design K1, $100,000, and cost of 30 unsold sandwiches ($1.20), and then subtracting the resultant from the profit of 70 sandwiches sold ($2.50-$1.20=$1.30). The expected outcome is -$32,500. Calculation of EMV: EMV is calculated by multiplying the payoff with the respective probabilities. = ( 42 , 500 × 0.80 ) + ( − 32 , 500 × 0.20 ) = $ 27 , 500 (1) The expected outcome for probability 0.80 and $42,500 is multiplied and the expected outcome for probability 0.20 and $-32,500 is multiplied, and the resultant of both is added to give the EMV for design K1 as $27,500. Design K2: Probability 0.85 = − $ 130 , 000 − ( 10 100 × 500 × 300 × $ 1.30 ) + ( 90 100 × 500 × 300 × $ 1.20 ) = − $ 130 , 000 − $ 19 , 500 + $ 162 , 000 = $ 12 , 500 The expected outcome is calculated by adding the cost for the design K2, $130,000, and the cost of 10 unsold sandwiches ($1

17th Edition

ISBN: 9781323590058

Author: Pearson

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Chapter 5, Problem 21P

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To determine: The design that has the highest profit.

Introduction: Expected monetary value (EMV) is a calculation system for expected returns for the certain decision made by a company.

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Chapter 5, Problem 20P

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Chapter 5 Solutions

OPEARATIONS MANAG.REV CUSTOM 2017

Ch. 5.S - Prob. 1DQ Ch. 5.S - Prob. 2DQ Ch. 5.S - Prob. 3DQ Ch. 5.S - Prob. 4DQ Ch. 5.S - Prob. 5DQ Ch. 5.S - Prob. 6DQ Ch. 5.S - Prob. 7DQ Ch. 5.S - Prob. 1P Ch. 5.S - Prob. 2P Ch. 5.S - Prob. 3P

Ch. 5.S - Prob. 4P Ch. 5.S - Prob. 5P Ch. 5.S - Prob. 6P Ch. 5.S - Prob. 7P Ch. 5.S - Prob. 8P Ch. 5.S - Prob. 9P Ch. 5.S - Prob. 1.1VC Ch. 5.S - Prob. 1.2VC Ch. 5.S - Prob. 1.3VC Ch. 5.S - Prob. 2.1VC Ch. 5.S - Prob. 2.2VC Ch. 5.S - Prob. 2.3VC Ch. 5 - Prob. 1DQ Ch. 5 - Prob. 2DQ Ch. 5 - In what ways is product strategy linked to product...Ch. 5 - Prob. 4DQ Ch. 5 - Prob. 5DQ Ch. 5 - Prob. 6DQ Ch. 5 - Prob. 7DQ Ch. 5 - Prob. 8DQ Ch. 5 - Prob. 9DQ Ch. 5 - Prob. 10DQ Ch. 5 - Prob. 11DQ Ch. 5 - Prob. 12DQ Ch. 5 - Prob. 13DQ Ch. 5 - Prob. 14DQ Ch. 5 - Prob. 15DQ Ch. 5 - Prob. 16DQ Ch. 5 - Why are the direct interaction and surrogate...Ch. 5 - Prob. 18DQ Ch. 5 - Prob. 1P Ch. 5 - Prob. 2P Ch. 5 - Question 5.3 Prepare a house of quality fora...Ch. 5 - Prob. 4P Ch. 5 - Prob. 5P Ch. 5 - Prob. 6P Ch. 5 - Prob. 7P Ch. 5 - Prob. 8P Ch. 5 - Prob. 9P Ch. 5 - Prob. 10P Ch. 5 - Prob. 11P Ch. 5 - Prob. 12P Ch. 5 - Select a service business that involves...Ch. 5 - Prob. 14P Ch. 5 - Prob. 15P Ch. 5 - Residents of Mill River have fond memories of ice...Ch. 5 - Prob. 17P Ch. 5 - Prob. 18P Ch. 5 - Prob. 19P Ch. 5 - Prob. 20P Ch. 5 - Prob. 21P Ch. 5 - Prob. 1CS Ch. 5 - Prob. 2CS Ch. 5 - Prob. 3CS Ch. 5 - Prob. 1VC Ch. 5 - Prob. 2VC Ch. 5 - Prob. 3VC Ch. 5 - Prob. 4VC

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The design that has the highest profit. Introduction: Expected monetary value (EMV) is a calculation system for expected returns for the certain decision made by a company.

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To determine: The design that has the highest profit. Introduction: Expected monetary value (EMV) is a calculation system for expected returns for the certain decision made by a company.

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Chapter 5 Solutions

To determine: The design that has the highest profit.

Introduction: Expected monetary value (EMV) is a calculation system for expected returns for the certain decision made by a company.