Question

A C E H J K A glass factory specializing in crystal is experiencing a substantial backlog, and the firm's management is considering three courses of action: a, b, or c $4,885 to set up new contract) $9,172 (additional operating costs per year) 2 Arrange for subcontracting a b. Construct new facilities Do nothing (no change) C There are three demand possibilities: 5 probability 0.157 7 Low Medium 0.484 High 0.359 10 The payoffs Probabilities 11 Gross Income Courses of Action low demand Med demand High Demand 12 a 12,636.93 $ 44,772.91 $ 13 72,633.90 $ 138,214.14 $ 104,100.32 b 21,233.23 $ 14 28,512.14 c $ 17,861.93 $ 54,558.79 16 Correctly complete the decision tree using excel and do all calculations to provide the best EMV 15 17

Answer 1

O.167 12636.93 Aarange toe subcontractig 448 44. 656S5 484 44772-91 O.259 72633 90 O.157 21233.23 O-484 Consinuct new saclites 2&512. 14 O.3 59 128214-14 GI696 985 O.157 17861 93 O.484 Do motting AISSS75 O.369 104100.32 B6S8 2.79225

a. Arrange for subcontracting

0.157*12636.93 + 0.484*44772.91 + 0.359*72633.90 - 4885 = 44844.65655

b. Construct new facilities

0.157*21233.23 + 0.484*28512.14 + 0.359*138214.14 - 9172 = 57580.36913

c. Do nothing

0.157*17861.93 + 0.484*54558.79 + 0.359*104100.32 = 66582.79225

best EMV is for Do nothing