Calculate the expected value, Operation Management

Assignment Help:

C and S Metal company produces stainless steel pots and pans. C and S can pursue either of two distribution plans for the coming year. The firm can either produce pots and pans for sale under a discount store label or manufacture a higher quality line for speciality stores and expensive mail order catalogues. High initial set-up costs along with C and S's limited capacity make it impossible for the firm to produce both lines. Profits under each plan depend upon the state of the economy. One of the three conditions will prevail:

Growth (probability = 0.3)

Normal (probability = 0.5)

Recession (probability = 0.2)

The outcome under each plan for each state of the economy is given in the table below. Figures in the table are profits measured in dollars. The probabilities for each economic condition represent crude estimates.

Economic condition

Discount line

Speciality line

Growth

Normal

Recession

250,000

220,000

140,000

400,000

230,000

20,000

(a) Calculate the expected value for each alternative.

(b) Which alternative is more risky?

(c) Taking into account the importance of risk, which alternative should an investor choose?


Related Discussions:- Calculate the expected value

Explain risks to a broad generic business strategy, What are some drawbacks...

What are some drawbacks and risks to a broad generic business strategy? To a focused strategy?

Disadvantages, What are the disadvantages of operation management?

What are the disadvantages of operation management?

Explain what message did management send through this tactic, Super TV Chan...

Super TV Channel 6 operates in a major Midwestern city and is on the air 24 hours a day. Labour-management relations there have been relatively good over the years. There are three

Explain what are the advantages and disadvantages, Discuss the advisability...

Discuss the advisability of using modular assemblies in manufacturing. (What are the advantages and disadvantages?) To what extent can these arguments be applied to service product

What are the potential advantages of profit sharing plan, To compete more e...

To compete more effectively, your organization is considering a profit sharing plan to increase employee effort and to encourage employees to think like owners. What are the potent

Define what are the steps and the benefits of a social audit, What are the ...

What are the steps and the benefits of a social audit?

Modified distribution methods, As mentioned previously the MODI method is ...

As mentioned previously the MODI method is an efficient method of testing the optimality of a transportation solution. It may be recalled that in the application of the steppi

Elements of operations management, Elements of Operations Management ...

Elements of Operations Management 1. Planning  This is the setting of appropriate courses of action to achieve the systems objectives.  2. Organising  This is the

Technological infrastructure, Identity technological infrastructure that su...

Identity technological infrastructure that supports operations management

Explain mbo to improve the innovation process at gsli, Do you believe that ...

Do you believe that MBO is appropriate for an organization where the primary output is innovation? If not why not? If so, how would you apply MBO to improve the innovation process

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd