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 teplitz decides to increase the weights for quantity, Charles Tepli...

Charles Teplitz's firm wishes to use factor rating to help select and outsourcing provider of logistics services. A) with weights 1-5(5 highest) and ratings 1-100 (100 highest), us

How do you explain queuing theory, How do you describe queuing theory? How ...

How do you describe queuing theory? How can you use queuing theory in your organization to improve process capability?

Explain ethical behaviour by corporations, Read and review the excerpts fro...

Read and review the excerpts from the Sarbanes-Oxley Act in the Appendix of the textbook. Identify three of the criminal penalties that can be charged under the Sarbanes-Oxley Act.

Explain what are the privacy requirements under hipaa, What are the privacy...

What are the privacy requirements under HIPAA? Explain why confidentiality of health information has been a controversial public policy issue. Give a real world example. How can he

Explain the framework of the general model of planned change, Describe the ...

Describe the framework of the general model of planned change. Include a discussion of each activity and a typical sequence of events.

Exactly how must sustainability be best defined, Exactly how should "sustai...

Exactly how should "sustainability" be best defined when making it part of a gold statement or performance objective for a business or organization?

Explain abc inventory classification system is true, 1. Which of the follow...

1. Which of the following statements about the ABC inventory classification system is TRUE? a. This approach is based on an insight established by Adam Smith in The Wealth of Na

Describe how preferred outcomes are derived in the short run, Discuss how p...

Discuss how preferred outcomes are derived in the short run?

What are the disadvantages of ethical relativism, What are some of the adva...

What are some of the advantages and disadvantages of ethical relativism as an ethical philosophy for business managers? Do you agree with the basic "relativism" rationale justifyin

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