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16.057) (16 points) Moon Micro is a small manufacturer of servers that currently builds its entire product in Santa Clara, California. As the server
16.057) (16 points) Moon Micro is a small manufacturer of servers that currently builds its entire product in Santa Clara, California. As the server market has grown dramatically, the Santa Clara plant has reached a capacity of 10,000 servers per year. Moon is considering two options to increase its capacity. The first choice is to add 10,000 units of capacity to the Santa Clara plant at an annualized fixed cost of $90000 plus $400 labor per server, then it's total capacity will be 20,000. The second choice is to have Molectron, an independent assembler, manufacture servers for Moon at the cost of $2,000 for each server (excluding raw materials cost). Raw materials cost $8,000 per server, and Moon sells each server for $16,000. Moon must make this decision for a two-year time horizon. During each year, demand for Moon servers has an 80 percent chance of increasing by 50 percent from the year before and a 20 percent chance of staying the same as the year before. Molectron's assembling prices may change as well. They are fixed for the first year but have a 50 percent chance of increasing by 20 percent in the second year and a 50
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