Question

A firm has received a production order of 10 injection-molded parts. The parts will sell for...

A firm has received a production order of 10 injection-molded parts. The parts will sell for $4000 each; it will cost $2500 to produce an individual part. The probability of a part meeting the final inspection standards is .80. Any good parts in excess of 10 can be salvaged for $2000; any bad parts produced can be salvaged for $1000. If an insufficient number of good parts are produced, each shortage must be overcome at a cost of $3000 in excess of the cost of production. Determine the number of parts to be scheduled for production to maximize expected profit.

Homework Answers

Answer #1

The number of parts schedule for production to maximize expected profit should be 15.

EXPLANATION

As the probability of a part meeting the final inspection standards is .80 i.e. 80%

Which means if we produce 15 parts then their will be 12 parts perfect meeting the final standard inspection. And their will be 3 bad parts.

So for the production of 15 parts money required will be = $2500 × 15 = $37500

And we will sell the 10 good parts at = $4000 × 10 = $40000

Now, their are 2 good parts left extra, that will sold for = $2000 × 2 = $4000

And their are 3 bad parts left, that will be sold for = $1000 × 3 = $3000

Total cost of selling = $40000 + $4000 + $3000 = $47000

Maximum profit = seeling price - production price = $47000 - $37500 = $9500

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1.Establishing the virtual Management: As known, managing virtual staff requires a different method or approach than...
1.Establishing the virtual Management: As known, managing virtual staff requires a different method or approach than managing local staff. Due to that reason, Golden Scent has developed a strategic plan to successfully manage its virtual staff in the USA. Identify the suitable manager. to make sure our work will proceed as we planned, Golden Scent willrecruit a virtual manager with the essential skills and knowledge required to manage virtual employees. Find the skilled people to work with. Since not everyone...
The project has been performing as planned, and the team members have been exhibiting increasing levels...
The project has been performing as planned, and the team members have been exhibiting increasing levels of trust between each other. The sponsor and the buyer have been satisfied with the delivery of business value, and user acceptance testing results are positive. A technical expert consulting with the team has expressed concerns that the team is not in agreement on the best way to deliver to the next review. If the project manager wants to support the team in reaching...
Consumerization of Technology at IFG3 “There’s good news and bad news,” Josh Novak reported to the...
Consumerization of Technology at IFG3 “There’s good news and bad news,” Josh Novak reported to the assembled IT management team at their monthly status meeting. “The good news is that our social media traffic is up 3000% in the past two years. Our new interactive website, Facebook presence, and our U-Tube and couponing promotions have been highly successful in driving awareness of our ‘Nature’s Glow’ brand and are very popular with our target demographic—the under-30s. Unfortunately, the bad news is...
Mattel Responds to Ethical Challenges Business Ethics This case was written by Debbie Thorne, John Fraedrich,...
Mattel Responds to Ethical Challenges Business Ethics This case was written by Debbie Thorne, John Fraedrich, O. C. Ferrell, and Jennifer Jackson, with the editorial assistance of Jennifer Sawayda. This case was developed for classroom discussion rather than to illustrate either effective or ineffective handling of an administrative, ethical, or legal discussion by management. All sources used for this case were obtained through publicly available material. Mattel, Inc. is a world leader in the design, manufacture, and marketing of family...
Please read the article and answear about questions. Determining the Value of the Business After you...
Please read the article and answear about questions. Determining the Value of the Business After you have completed a thorough and exacting investigation, you need to analyze all the infor- mation you have gathered. This is the time to consult with your business, financial, and legal advis- ers to arrive at an estimate of the value of the business. Outside advisers are impartial and are more likely to see the bad things about the business than are you. You should...
1. The failure of the new supply chain system affected Nike adversely. What were the reasons...
1. The failure of the new supply chain system affected Nike adversely. What were the reasons for the failure and how did the breakdown harm Nike? 2. What are the important elements to be kept in mind while implementing a new system in an organization? What is the importance of a good working relationship between partners and the sharing of responsibility in implementing critical projects? What mistakes did Nike and i2 make? 3. comment on the lessons learned and the...
Sign In INNOVATION Deep Change: How Operational Innovation Can Transform Your Company by Michael Hammer From...
Sign In INNOVATION Deep Change: How Operational Innovation Can Transform Your Company by Michael Hammer From the April 2004 Issue Save Share 8.95 In 1991, Progressive Insurance, an automobile insurer based in Mayfield Village, Ohio, had approximately $1.3 billion in sales. By 2002, that figure had grown to $9.5 billion. What fashionable strategies did Progressive employ to achieve sevenfold growth in just over a decade? Was it positioned in a high-growth industry? Hardly. Auto insurance is a mature, 100-year-old industry...
What tools could AA leaders have used to increase their awareness of internal and external issues?...
What tools could AA leaders have used to increase their awareness of internal and external issues? ???ALASKA AIRLINES: NAVIGATING CHANGE In the autumn of 2007, Alaska Airlines executives adjourned at the end of a long and stressful day in the midst of a multi-day strategic planning session. Most headed outside to relax, unwind and enjoy a bonfire on the shore of Semiahmoo Spit, outside the meeting venue in Blaine, a seaport town in northwest Washington state. Meanwhile, several members of...
Please answer the following Case analysis questions 1-How is New Balance performing compared to its primary...
Please answer the following Case analysis questions 1-How is New Balance performing compared to its primary rivals? How will the acquisition of Reebok by Adidas impact the structure of the athletic shoe industry? Is this likely to be favorable or unfavorable for New Balance? 2- What issues does New Balance management need to address? 3-What recommendations would you make to New Balance Management? What does New Balance need to do to continue to be successful? Should management continue to invest...