Decision tree, Operation Management

Assignment Help:
#questionSpencerville Products is expanding its operations west of the Mississippi. Its first step is to build a manufacturing facility in Denver to satisfy demand on the West Coast. Spencerville has an option to build either a large facility that has an annual output of 500,000 units per year or a smaller facility with an output of 250,000 units per year. It must build one of these two facilities - it does not have any other options.

The expected demand for the company''s products is shown as either high or moderate in the table below:

Demand Level Annual Demand (units/year) Probability
High 450,000 0.4
Moderate 150,000 0.6

The small facility has a profit of $5.00 per unit. The large facility has a profit of $4.00/unit.

a) What size facility should Spencerville Products build based on expected values and using a decision tree approach? You must also provide the decision tree using the appropriate decision tree symbols.




b) Suppose that the company is not certain about the 450,000 projection for the High Demand scenario. It could be higher than this projection. How sensitive is the selection in a) to the High Demand projection. In other words, at what annual demand for the High Demand scenario would the company be indifferent between the two size facilities?
..

Related Discussions:- Decision tree

Define advantage and disadvantages of using optical scanners, What are the ...

What are the advantage and disadvantages of using optical scanners to score the results of a test?

Employees that meet to recognize work problems, Small groups of employees t...

Small groups of employees that meet to recognize work problems and their solution are known as   Quality circles.

Explain financial aspects of owning your own business, Now let's continue o...

Now let's continue our discussion about the financial aspects of owning your own business that are part of TCO #7 by considering the idea of "ratio analysis" (Hatten, 2009, p. 215)

Implementation of the cost of quality, Question: What are different con...

Question: What are different conditions which a company has to make sure before the implementation of the Cost of Quality? Description/Definition of cost of Quality • The

Explain a production manager at a contour manufacturing, A production manag...

A production manager at a Contour Manufacturing plant has inspected the number of defective plastic molds in five random samples of 30 observations each. Following are the number o

Control charts for variables, Control Charts for Variables  Two comple...

Control Charts for Variables  Two complementary charts are commonly used for the statistical control of process variables. One controls the process mean by monitoring the mean

Production & Purchasing Managements, Hierarchical planning in operations/Pr...

Hierarchical planning in operations/Production managemnt and the types of time frames in each hierarchy?

Explain industries is most likely to use database marketing, Which of the f...

Which of the following industries is most likely to use database marketing? a. A supermarket chain b. A school system c. A local restaurant d. A p

Explain the replace with similar, Describe the four options highlighted in ...

Describe the four options highlighted in the case study in terms of their feasibility, acceptability and vulnerability. The four options at Chatworth -the adventure playground deci

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