Explain expected monetary value criterion, Operation Management

Assignment Help:

The product design group of Flores Electric Supplies, Inc., has determined that it needs to design a new series of switches. It must decide on one of three design strategies. The market forecast is for 200,000 units. The better and more sophisticated the design strategy and the more time spent on value engineering, the less will be the variable cost. The chief of engineering design, Dr. W. L. Berry, has decided that the following costs are a good estimate of the initial and variable costs connected with each of the three strategies:

a. Low-tech: A low-technology, low cost process consisting of hiring several new junior engineers. This option has a fixed cost of $45,000 and variable-cost probabilities of .3 for $.55 each, .4 for $.50, and .3 for $.45.

b. Subcontract: A medium-cost approach using a good outside design staff. This approach would have a fixed cost of $65,000 and a variable-cost probabilities of .7 of $.45, .2 of $.40, and .1 of $.35.

c. High-tech: A high-technology approach using the very best of the inside staff and the latest computer-aided design technology. This approach has a fixed coast of $75,000 and a variable-cost probabilities of .9 of $.40 and .1 of $.35.

What is the best decision based on an expected monetary value criterion? (note:we want the lowest EMV, since dealing with costs.)


Related Discussions:- Explain expected monetary value criterion

Security - customer satisfaction and service quality, Security - Customer S...

Security - Customer Satisfaction and Service Quality Is the freedom from danger, risk or doubt. It involves: 1. Physical safety (will I get mugged at the automatic teller

OPERATIONS RESEARCH, Discuss the methodology of operation research

Discuss the methodology of operation research

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

Layout and flow, what are the objectives that an operation should seek in o...

what are the objectives that an operation should seek in order to ensure a good layout

Describe the role that organizational learning, Explain the role that organ...

Explain the role that organizational learning and creativity play in helping managers to improve their decisions.

Explain economic aspect of the triple bottom line concept, A firm's busines...

A firm's business practices toward its labor force pertain mainly to the economic aspect of the triple bottom line concept.

Do whole foods markets mission and vision, Do Whole Foods Markets mission/v...

Do Whole Foods Markets mission/vision and the core values as presented in cases Exhibit 1 and 3 really matter? Are they real or just cosmetic window dressing? What evidence can you

Strategy and standards approaches to reviewing software, Strategy and Stand...

Strategy and Standards Please respond to the following: •Discuss the factors that should be considered when developing a consistent IM / IT strategy. Explain your rationale. •Analy

Explain how does this sort of thing happen in organizations, We have all wo...

We have all worked with someone who did not seem to fit the role for which he or she was hired, or did not seem to fit in with the organization, or did not have the right skills fo

Explain cost of a project, illustrate how to effectively and efficiently re...

illustrate how to effectively and efficiently report on the cost of a project to the different stakeholder groups • Use figures and tables to provide examples • Show calculat

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