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Zhu Manufacturing is considering the introduction of a family of new products. Long-term demand for the product group is somewhat predictable, so the manufacturer must be concerned with the risk of choosing a process that is inappropriate. Faye Zhu is VP of operations. She can choose among batch manufacturing or custom manufacturing, or she can invest in group technology. Zhu won't be able to forecast demand accurately until after she makes the process choice. Demand will be classified into four compartments: poor, fair, good, and excellent. The table below indicates the payoffs (profits) associated with each process/demand combination, as well as the probabilities of each long-term demand level: Poor 0.10 -$300,000 $200,000 - $1,200,000 Probability Batch Custom Group technology a) The alternative that provides Zhu the greatest expected monetary value (EMV) is Fair 0.40 $1,200,000 $300,000 -$500,000 Demand Good 0.25 $1,200,000 $750,000 $22,000 Excellent 0.25 $1,200,000 $800,000 $2,000,000 O The EMV for this decision is $ (enter your answer as a whole number). b) The amount that Faye Zhu would be willing to pay for a forecast that would accurately determine the level of demand in the future= $(enter your answer as a whole number).

Zhu Manufacturing is considering the introduction of a family of new products. Long-term demand for the product group is somewhat predictable, so the manufacturer must be concerned with the risk of choosing a process that is inappropriate. Faye Zhu is VP of operations. She can choose among batch manufacturing or custom manufacturing, or she can invest in group technology. Zhu won't be able to forecast demand accurately until after she makes the process choice. Demand will be classified into four compartments: poor, fair, good, and excellent. The table below indicates the payoffs (profits) associated with each process/demand combination, as well as the probabilities of each long-term demand level: Poor 0.10 -$300,000 $200,000 - $1,200,000 Probability Batch Custom Group technology a) The alternative that provides Zhu the greatest expected monetary value (EMV) is Fair 0.40 $1,200,000 $300,000 -$500,000 Demand Good 0.25 $1,200,000 $750,000 $22,000 Excellent 0.25 $1,200,000 $800,000 $2,000,000 O The EMV for this decision is $ (enter your answer as a whole number). b) The amount that Faye Zhu would be willing to pay for a forecast that would accurately determine the level of demand in the future= $(enter your answer as a whole number).

Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter17: Making Decisions With Uncertainty
Section: Chapter Questions
Problem 17.6IP
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Zhu Manufacturing is considering the introduction of a family of new products. Long-term demand for the product group is somewhat predictable, so the manufacturer must be concerned with the risk of choosing a process that is inappropriate. Faye Zhu is VP of operations. She can choose among batch manufacturing or custom manufacturing, or she can invest in group technology. Zhu won't be able to forecast demand accurately until after she makes the process choice. Demand will be classified into four compartments: poor, fair, good, and excellent. The table below indicates the payoffs (profits) associated with each process/demand combination, as well as the probabilities of each long-term demand level: Poor 0.10 - $300,000 $200,000 - $1,200,000 Fair 0.40 $1,200,000 $300,000 - $500,000 Demand Good 0.25 $1,200,000 $750,000 $22,000 Excellent 0.25 $1,200,000 $800,000 $2,000,000 Probability Batch Custom Group technology a) The alternative that provides Zhu the greatest expected monetary value (EMV) is The EMV for this decision is $ (enter your answer as a whole number). b) The amount that Faye Zhu would be willing to pay for a forecast that would accurately determine the level of demand in the future = $(enter your answer as a whole number).
Transcribed Image Text:Zhu Manufacturing is considering the introduction of a family of new products. Long-term demand for the product group is somewhat predictable, so the manufacturer must be concerned with the risk of choosing a process that is inappropriate. Faye Zhu is VP of operations. She can choose among batch manufacturing or custom manufacturing, or she can invest in group technology. Zhu won't be able to forecast demand accurately until after she makes the process choice. Demand will be classified into four compartments: poor, fair, good, and excellent. The table below indicates the payoffs (profits) associated with each process/demand combination, as well as the probabilities of each long-term demand level: Poor 0.10 - $300,000 $200,000 - $1,200,000 Fair 0.40 $1,200,000 $300,000 - $500,000 Demand Good 0.25 $1,200,000 $750,000 $22,000 Excellent 0.25 $1,200,000 $800,000 $2,000,000 Probability Batch Custom Group technology a) The alternative that provides Zhu the greatest expected monetary value (EMV) is The EMV for this decision is $ (enter your answer as a whole number). b) The amount that Faye Zhu would be willing to pay for a forecast that would accurately determine the level of demand in the future = $(enter your answer as a whole number).
he introduction of a family of new products. Long-term demand for the product group anufacturer must be concerned with the risk of choosing a process that is inappropriate. Faye Zhu is VP of operations. She can choose uring, or she can invest in group technology. Zhu won't be able to forecast demand accurately until after she makes the process choic boor, fair, good, and excellent. The table below indicates the payoffs (profits) associated with each process/demand combination, as w Probability Batch Custom Group technology Poor 0.10 - $300,000 $200,000 - $1,200,000 the greatest expected monetary value (EMV) is enter your answer as a whole number). d be willing to pay for a forecast that would accura Fair 0.40 $1,200,000 $300,000 - $500,000 Batch Demand Group technology Custom Good 0.25 $1,200,000 $750,000 $22,000 Excellent 0.25 $1,200,000 $800,000 $2,000,000 mand in the future = $ (enter your answer as a who
Transcribed Image Text:he introduction of a family of new products. Long-term demand for the product group anufacturer must be concerned with the risk of choosing a process that is inappropriate. Faye Zhu is VP of operations. She can choose uring, or she can invest in group technology. Zhu won't be able to forecast demand accurately until after she makes the process choic boor, fair, good, and excellent. The table below indicates the payoffs (profits) associated with each process/demand combination, as w Probability Batch Custom Group technology Poor 0.10 - $300,000 $200,000 - $1,200,000 the greatest expected monetary value (EMV) is enter your answer as a whole number). d be willing to pay for a forecast that would accura Fair 0.40 $1,200,000 $300,000 - $500,000 Batch Demand Group technology Custom Good 0.25 $1,200,000 $750,000 $22,000 Excellent 0.25 $1,200,000 $800,000 $2,000,000 mand in the future = $ (enter your answer as a who
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