Question

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, 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:

?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).

Answer 1