Operations Management: Processes and Supply Chains (12th Edition) (What's New in Operations Management)
12th Edition
ISBN: 9780134741062
Author: Lee J. Krajewski, Manoj K. Malhotra, Larry P. Ritzman
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 4, Problem 21P
A manager is trying to decide whether to buy one machine or two. If only one machine is purchased and demand proves to be excessive, the second machine can be purchased later. Some sales would be lost, however, because the lead time for delivery of this type of machine is 6 months. In addition, the cost per machine will be lower if both machines are purchased at the same time. The probability of low demand is estimated to be 0.30 and that of high demand to be 0.70. The after tax
If one machine is purchased and demand is low, the NPV is $120,000. If demand is high, the manager has three options: (1) doing nothing, which has an NPV of $120,000; (2) subcontracting, with an NPV of $140,000; and (3) buying the second machine, with an NPV of $130,000.
- Draw a decision tree for this problem.
- What is the best decision and what is its expected payoff?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
A $45,000 investment in a new conveyor system is projected to improve throughput and increasing revenue by $14,000 per year for five years. The conveyor will have an estimated market value of $4,000 at the end of five years. Using NPV with a MARR of 12%, is this a good investment?
A scrap value of $ 1300 at the end of the 6th year of an agricultural machine purchased for $ 8000 It is expected to be sold. The operating costs of the machine are 1700 dollars in the first year and in other years. It is estimated that it will increase by 11% each year. At an annual interest rate of 8% Find the equivalent present value of the machine.
EmKay Hardware just purchased a new commercial forklift for $12,000. First year's O&M costs
2)
are expected to be $1,000 and they are expected to increase by 10% per year over the previous year's cost from
the second year onwards. The firm expects to sell the forklift for $1,200 at the end of its useful life of 6 years.
MARR is 10% per year compounded annually.
a)
b)
forklift.
What is the capital recovery (CR) cost for the commercial forklift?
Determine the equivalent uniform annual cost for owning and operating this commercial
Chapter 4 Solutions
Operations Management: Processes and Supply Chains (12th Edition) (What's New in Operations Management)
Ch. 4 - Prob. 1DQCh. 4 - Prob. 2DQCh. 4 - The Dahlia Medical Center has 30 labor rooms, 15...Ch. 4 - A process currently services an average of 50...Ch. 4 - An airline company must plan its fleet capacity...Ch. 4 - Food Goblin Supermarkets use both cashiers and...Ch. 4 - Returning to Problem 4, under both assumption of...Ch. 4 - Purple Swift manufactures birdhouses in lots of...Ch. 4 - Macon Controls produces three different types of...Ch. 4 - Up, Up, and Away is a producer of kites and wind...
Ch. 4 - Tuff-Rider, Inc. manufactures touring bikes and...Ch. 4 - Arabelle is considering expanding the floor area...Ch. 4 - The Astro World amusement park has the opportunity...Ch. 4 - Kim Epson operates a full-service car wash, which...Ch. 4 - MKM International is seeking to purchase a new CNC...Ch. 4 - Prob. 17PCh. 4 - Prob. 18PCh. 4 - Prob. 19PCh. 4 - Dawson Electronics is a manufacturer of high-tech...Ch. 4 - A manager is trying to decide whether to buy one...Ch. 4 - Acme Steel Fabricators experienced booming...Ch. 4 - Referring to Problem 7, the operations manager at...Ch. 4 - Darren Mack owns the Gas n’ Go convenience store...Ch. 4 - Prob. 25PCh. 4 - Prob. 1VCCh. 4 - Prob. 2VCCh. 4 - How does Southwest Airlines know they are...Ch. 4 - Prob. 4VCCh. 4 - Prob. 1CCh. 4 - Prob. 2CCh. 4 - Prob. 3C
Additional Business Textbook Solutions
Find more solutions based on key concepts
Many companies including Company OM tried to implement dynamic pricing in their ticketing system. The dynamic p...
Principles of Operations Management: Sustainability and Supply Chain Management (10th Edition)
The flowchart for the process at the local car wash. Introduction: Flowchart: A flowchart is a visualrepresenta...
Principles Of Operations Management
There is a huge demand in the United States and elsewhere for affordable women’s clothing. Low-cost clothing re...
Loose-leaf for Operations Management (The Mcgraw-hill Series in Operations and Decision Sciences)
2. Identify four people who have contributed to the theory and techniques of operations management.
Operations Management
There is a huge demand in the United States and elsewhere for affordable women’s clothing. Low-cost clothing re...
Operations Management
2. In what circumstances might a market-pull approach or a technology-push approach to new-product design be th...
OPERATIONS MANAGEMENT IN THE SUPPLY CHAIN: DECISIONS & CASES (Mcgraw-hill Series Operations and Decision Sciences)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.Similar questions
- 49. Maintenance costs for a new facility are expected to be $1i12,000 for the first year of operation. It is anticipated that these costs will increase at a rate of 8 percent per year. Assuming a rate of return of 10 percent, what is the present value of the stream of maintenance costs over the next 30 years?arrow_forwardCompany QXL has generated $1 million in gross sales for Q4, 2021, which is 5% higher than its gross sales for Q3, 2021. However, Q4 is considered as the peak season for QXL. Comparing with the previous peak season, its current Q4 gross sales are 2% lower than the gross sales for Q4 2020. When a client asks Winona (who is a financial planner) for investment advice on QXL, Winona suggests the client to invest in QXL. She only presents the percentage change in gross sales from Q3 to Q4 2021 (i.e. 5% increase) and tells the clients that this is a positive signal of increase in its future price. You are required to establish what is unethical and which Standard is most likely violated.arrow_forwardFedori Corporation has a Parts Division that does work for other Divisions in the company as well as for outside customers. The company's Machinery Division has asked the Parts Division to provide it with 4,000 special parts each year. The special parts would require P23.00 per unit in variable production costs. The Machinery Division has a bid from an outside supplier for the special parts at P37.00 per unit. In order to have time and space to produce the special part, the Parts Division would have to cut back production of another part-the YR24 that it presently is producing. The YR24 sells for P40.00 per unit, and requires P28.00 per unit in variable production costs. Packaging and shipping costs of the YR24 are P3.00 per unit. Packaging and shipping costs for the new special part would be only P1.50 per unit. The Parts Division is now producing and selling 15,000 units of the YR24 each year. Production and sales of the YR24 would drop by 20% if the new special part is produced for…arrow_forward
- A Laser cutting machine is costed on a machine hour rate basis. On the basis of the given information determine the cost for running the machine for 45 hours to complete a specific customer order. Select your answer (to the nearest £1) from A to E below. Time used (for this specific order) Power cost of machine 45 hours £2-00 per hour £350,000 per year Depreciation and annual running costs (including labour) The expected running time of the machine is 235 days per year with two 7.5 hour shifts each day. £4558 £3998 £9026 £4468 £8936arrow_forwardA firm is selling two products, chairs and bar stools, each at $50 per unit. Chairs have a variable cost of $25, and bar stools $20. Fixed cost for the firm is $20,000. If the sales mix changes to 1. 4 (one chair sold for every four bar stools sold) what is theb break-evenpoint in dollars of sales? In units of chairs and bar stools?arrow_forwardA book publisher has fixed costs of $300,000 and variable costs per book of $8.00. The book sells for $23.00 per copy.a. How many books must be sold to break even?b. If the fixed cost increased, would the new break-even point be higher or lower?c. If the variable cost per unit decreased, would the new break-even point be higher or lower?arrow_forward
- A 3 year-old a computer-controlled fabric cutting machine, which had a $25,000 purchasing price, has a current market (trade-in) value of $10,000 and expected O&M costs of $4,000, increasing by 1,000 per year. The machine is required to have an immediate repair that costs $2,000. The estimated market values are expected to decline by 20% annually (going forward). The machine can be used for another 7 years at most. The new machine has a $40,000 purchasing price. The new machine's O&M cost is estimated to be $4,000 for the first year, decreasing at an annual rate of $100 thereafter. The firm's MARR is 10%. Assume a unique minimum AEC(10%) for both machines (both the current and replacement machine). Using the information above, determine the economic service life along with the optimum annual equivalent cost of the defender (This is an infinite Horizon decision problem). a) n=4 and AEC=Between $8,400 and $8,800 b) n=4 and AEC=Between $8,000 and $8,400 c) n=5 and AEC=Between $8,400 and…arrow_forwardWould the choice of denominator level affect the amount of the fixed factory overhead budget variance? Fixed overhead production volume variance? Explainarrow_forwardSoutheastern Airlines's daily flight from Atlanta toCharlotte uses a Boeing 737, with all-coach seating for 120 people.In the past, the airline has priced every seat at $140 for theone-way flight. An average of 80 passengers are on each flight.The variable cost of a filled seat is $25. Aysajan Eziz, the newoperations manager, has decided to try a yield revenue approach,with seats priced at $80 for early bookings and at $190 for bookingswithin 1 week of the flight. He estimates that the airline willsell65 seats at the lower price and 35 at the higher price. Variablecost will not change. Which approach is preferable to Mr. Eziz?arrow_forward
- The system below have components A and B, which function correctly with a probability of 0.8 and 0.9. Explain under what scenarios the system will function correctly then calculate the relaiability of the system.arrow_forwardA shipment of 40 pounds of fresh salmon is purchased for $4.50 per pound. The yield of the fish is 27.2 pounds after filleting. What is the yield % of the drawn salmon? What is the EP cost per pound? What is the cost for a 5-ounce portion?arrow_forwardJ.W. Electronics sells one of its 27-inch screen TV’s for $300. The fixed cost for producing this type of TV is $125 000. The variable cost per unit is $175 a) Based on the above information, what is the break-even point in units? show calculations b. The competition has reduced its price on a similar TV to $275. J.W. Electronics is considering reducing its selling price to $275 to compete. Find the new break-even point if the sales price is reduced to $275. Show your calculations c) Calculate the profit realized by J.W. Electronics on the sale of 1,500 TVs if it keeps its selling price at $300. Show your calculations.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,
Operations ManagementOperations ManagementISBN:9781259667473Author:William J StevensonPublisher:McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi...Operations ManagementISBN:9781259666100Author:F. Robert Jacobs, Richard B ChasePublisher:McGraw-Hill Education
Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage Learning
Production and Operations Analysis, Seventh Editi...Operations ManagementISBN:9781478623069Author:Steven Nahmias, Tava Lennon OlsenPublisher:Waveland Press, Inc.
Practical Management Science
Operations Management
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:Cengage,
Operations Management
Operations Management
ISBN:9781259667473
Author:William J Stevenson
Publisher:McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi...
Operations Management
ISBN:9781259666100
Author:F. Robert Jacobs, Richard B Chase
Publisher:McGraw-Hill Education
Purchasing and Supply Chain Management
Operations Management
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Cengage Learning
Production and Operations Analysis, Seventh Editi...
Operations Management
ISBN:9781478623069
Author:Steven Nahmias, Tava Lennon Olsen
Publisher:Waveland Press, Inc.
Inventory Management | Concepts, Examples and Solved Problems; Author: Dr. Bharatendra Rai;https://www.youtube.com/watch?v=2n9NLZTIlz8;License: Standard YouTube License, CC-BY