Acme Steel Fabricators experienced booming business for the past five years. The

Question

Acme Steel Fabricators experienced booming business for the past five years. The company fabricates a wide range of steel products, such as railings, ladders, and light structural steel framing The current manual method of materials handling is causing operating efficiencies in addition to new sales. Finally, if demand falls, the hoist will result in an estimated annual loss of $50,000. The probability is estimated to be 0.20 for higher demand and 0.10 for lower demand If the forklift is purchased, annual payoffs will be S5,00D if demand is unchanged, $10,000 if demand rises, and $20,000 if demand falls. a. Choose the correct decision tree for this problem. ?A. excessive inventories and congestion. Acme is considering the purchase of an overhead rai-mounted hoist system or a forklift truck to increase capacity and improve manufacturing efficiency The annual pretax payoff from the system depends on future demand. If demand stays at the current level, the probability of which is D.70, annual savings from the overhead hoist will be $12,000 If demand rises, the hoist will save $22,000 annually because of OB. [0.70] No Change 010 Increase $22,00 0.20] Decrease50,000 $12 000 O.7O] No Change 0.10] Decrease o.70 No Change s5000 0.10)] Decreas9$20,000 Forklift Hoist 0 20) Increase$12,000 22,000 -$50,0D0 0.70] No Change s5,000 0.10] Increase 510.000 0.201 Decrease20,000 Increase s10,000 Forklift D. 0 70) No Chang12,000 020] Increase $22,000 101 Decrease 50,000 0.70] No Change $12 000 0 20] Increase $22.000 0.10] Decrease50,000 Hoist 0.70] No Change s5,000 O.20] Increase$10,000 O.70 No Change s5,c0o O20] Increase 10,000 0 10] Decrease $20,000 Fork00 Decrease$20,0

Explanation / Answer

Correct Answer:

A

As per the given details, the decision tree is created. The hoist is offering $12000, $22000 and -$50000 in unchanged demand, high demand and low demand. But, forklift will offer the payoff of $5000, $10000, and -$20000 in unchanged demand, high demand and low demand respectively.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.