TCO B) The SuperFlyer Corporation is developing a revolutionary flying disc. The

Question

TCO B) The SuperFlyer Corporation is developing a revolutionary flying disc. The new toy can fly straight over a great distance, which is exciting by itself. However, this disc will also return to the owner in response to his or her voice! Because this is an advance over anything that this company has done before, estimating the amount and cost of the hi-tech materials is difficult. The project manager recommends using a range estimating process to develop an estimate. The values below are submitted by the project team. Current estimates for cost of material are as follows. Optimistic cost of smart resin: $8.00 per lb Most likely cost of smart resin: $9.25 per lb Pessimistic cost of smart resin: $12.50 per lb Current estimates for total material requirements are as follows. Optimistic quantity: 15 lb / 100 units Most likely quantity: 19 lb / 100 units Pessimistic quantity: 22 lb / 100 units (a) What is the expected price of the material per pound? (b) What is the expected amount of material needed for 100 units? (c) What is the expected cost for 100 units?

Explanation / Answer

To the determine expected value consider beta distribution for price & amount.

Let,

M = most likely value

O = optimistic value

E = expected value

P = pessimistic value

E = (O + 4M + P)/6

The Expected price of the material = (8 + 4*9.25 + 12.50)/6 = 9.5833

The Expected amount of the material needed = (15 + 4*19 + 22)/6 = 18.8333

The Expected cost of the material for 100 units = 9.5833 × 18.833 = $180.48

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