The expected profit level of design K2 is $___, ( Enter your response as a real

Question

The expected profit level of design K2 is $___, (Enter your response as a real number rounded to two decimal places.)

The expected profit level of design K3 is $___, (Enter your response as a real number rounded to two decimal places.)

McBurger, Inc., wants to redesign its kitchens to improve productivity and quality. Three designs, called designs K1, K2, and K3, are under consideration. No matter which design is used, daily production of sandwiches at a typical McBurger restaurant is for 550 sandwiches. A sandwich costs $1.20 to produce. Non-defective sandwiches sell, on the average, for $2.75 per sandwich. Defective sandwiches cannot be sold and are scrapped The goal is to choose a design that maximizes the expected profit at a typical restaurant over a 300-day period. Designs K1, K2, and K3 cost $130,000, $130,000, and $170,000, respectively Under design K1, there is a.80 chance that 90 out of each 100 sandwiches are non-defective and a .20 chance that 70 out of each 100 sandwiches are non-defective. Under design K2, there is a .85 chance that 90 out of each 100 sandwiches are non-defective and a .15 chance that 75 out of each 100 sandwiches are non-defective Under design K3, there is a .90 chance that 95 out of each 100 sandwiches are non-defective and a.10 chance that 80 out of each 100 sandwiches are non-defective. The expected profit level of design K1 is S. (Enter your response as a real number rounded to two decimal places.)

Explanation / Answer

K1= $62225

K2= $30166

K3= $56256

K1 K2 K3 Cost per sandwich 1.2 1.2 1.2 Total sandwiches 165000 165000 165000 Cost 198000 198000 198000 Design Cost 130000 170000 170000 Total cost 328000 368000 368000 Non defective (out of 100) 86 87.75 93.5 sum of (Probability * no. of non-defective ) Total non-defective sandwiches 141900 144787.5 154275 non defective (out of 100)*total sandwiches /100 Total price 390225 398165.6 424256.3 total non defective sandwiches * total sandwiches Profit 62225 30166 56256

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