In the first homework, we had the following setup and data: An operations manage

Question

In the first homework, we had the following setup and data: An operations manager is deciding on the level of automation for a new process. The fixed cost for automation includes the equipment purchase price, installation, and initial spare parts. The variable costs per unit for each level of automation are primarily labor related. We now have some additional information that can help us make a better decision. The selling price of each unit is $116. Based on past sales data, marketing has projected that the probabilities of future demand levels are: What is the expected value of Option A?

Explanation / Answer

Option A contribution per unit is 67 and the Total contribution is 67 * 5000= 335000.

probability is .33 so the expected value of the option A is prob* Total contribution= 0.33*335000= 110550

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

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