Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

De Leon Engineering designs and constructs air conditioning and heating ( HVAC ) systems for hospitals and clinics. Currently the company's staff is overloaded with

De Leon Engineering designs and constructs air conditioning and heating (HVAC) systems for hospitals and clinics. Currently the company's staff is overloaded with design work. There is a major design project due in 8 weeks. The penalty for completing the design late is $14,000 per week, since any delay will cause the facility to open later than anticipated, and cost the client significant revenue. If the company uses its inside engineers to complete the design, it will have to pay them overtime for all work. Owner Roberta De Leon has estimated that it will cost $11,000 per week (wages and overhead), including late weeks, to have company engineers complete the design. Roberta is also considering having an outside engineering firm do the design. A bid of $92,000 has been received for the completed design. Yet another option for completing the design is to conduct a joint design by having a third engineering company complete all electromechanical components of the design at a cost of $54,000. De Leon Engineering would then complete the rest of the design and control systems at an estimated cost of $30,000. Roberta has estimated the following probabilities of completing the project within various time frames when using each of the three options. Those estimates are shown in the following table:
\table[[Probability of Completing the Design,],[Option,On Time,One Week Late,Two Weeks Late,Three Weeks Late],[Internal Engineers,0.3,0.4,0.3,-],[External Engineers,0.1,0.3,0.4,0.2],[Joint Design,0.1,0.3,0.5,0.1]]
The expected monetary value using inside engineers to complete the design is $.(Enter your response as an integer.)
The expected monetary value using an outside engineering firm to complete the design is $ .(Enter your response as an integer.)
The expected monetary value of conducting a joint design is $.(Enter your response as an integer.)
What is the best decision based on an expected monetary value criterion?
Joint design
Internal engineers
External engineering firm
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Mckinsey Way

Authors: Ethan Rasiel

1st Edition

0070534489, 978-0070534483

More Books

Students also viewed these General Management questions