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 what are the schedule and cost variances, I need to find the schedu...

I need to find the schedule and cost variances for a project Actual cost at month 16 = $540,000 Scheduled cost = $523,000 Earned value = $535,000 Provided this information,

Explain why is the notion of alignment, Why is the notion of "alignment" so...

Why is the notion of "alignment" so important in strategic HRM?

What are the advantages of a partnership with a friend, The consensus is hi...

The consensus is hiring friends may not work well. Let's talk about partnerships. What are the advantages and disadvantages of a partnership with a friend?

Production planning and control - definition, Production Planning and Contr...

Production Planning and Control - Definition According to Alford  and Beatty " Production planning  and control  comprise  the planning  routing  scheduling  dispatching  an

Compute the productivity in sales revenue/labour expense, Sailmaster makes ...

Sailmaster makes high-performance sails for competitive windsurfers. Below is information about the inputs and outputs for one model, the Windy 2000. Units sold 1,217 Sale price ea

Describe why managers should know about research, Q1. Explain why managers ...

Q1. Explain why managers should know about research. Q2. BrokenViolin956 Read the entrepreneur's dilemma and the questions that follow. Identify the legal issue(s) and apply

Discuss regarding the interval estimate, Increasing the size of the samples...

Increasing the size of the samples in a study to estimate the difference between two population means will increase the level of confidence that a decision maker can have regarding

Explain supply chain might also benefit the national economy, The bullwhip ...

The bullwhip effect is often blame for the boom-and-bust cycles in our national economy. Which of the remedies for eliminating this effect in a supply chain might also benefit the

Describe the key success factors, Select an industry or a company of your ...

Select an industry or a company of your choice. Using figure 4.3 on page 110, apply the industry or the company by identifying the segment and key success factors. Justify / explai

Write formal company e-mails to employees, Acting as supervisor for a compa...

Acting as supervisor for a company of your choice, draft two examples of formal company e-mails to employees. The first email will be good-news message delivering information

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