A.9 Zhu Manufacturing is considering the introduction of a family of new products. Long-term demand for the

Question:

• • A.9 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. Faye 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 following table indicates the payoffs (profits) associated with each process/demand combination, as well as the probabilities of each long-term demand level:

image text in transcribed

a) Based on expected value, what choice offers the greatest gain?

b) What would Faye Zhu be willing to pay for a forecast that would accurately determine the level of demand in the future?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question
Question Posted: