pecter IC). 7. Macon Controls produces three different types of control units used to protect industrial equipment from overheating. The manager believes that a 20 percent capacity cushion is best. TABLE 4.2 CAPACITY INFORMATION FOR MACON CONTROLS TIME STANDARD DEMAND FORECAST Component Processing (hr/unit) Setup (hr/lot) Lot Size (units/lot) Pessimistic Expected Optimistic A 0.05 1.0 60 16,000 16,000 26,000 0.30 4.1 80 11,000 12,000 18,000 C 0.05 8.3 100 16,000 23,000 35,000 a. How many machines are required to meet minimum (pessimistic) demand, expected demand, and maximum (optimistic) demand? c. If the operations manager has three machines and be- lieves that the plant can reduce setup time by 25 percent through process improvement initiatives, does that plant have adequate capacity to meet all demand scenarios without increasing lot sizes? b. How many machines are required if the operations manager decides to double lot sizes? Tools for Capacity Planning 20. Dawson Electronics is a manufacturer of high-tech control modules for lawn sprinkler systems. Denise, the CEO, is try- ing to decide if the company should develop one of the two potential new products, the Water Saver 1000 or the Greener Grass 5000. With each product, Dawson can capture a bigger market share if it chooses to expand capacity by buying ad- ditional machines. Given different demand scenarios, their probabilities of occurrence, and capacity expansion versus no change in capacity, the potential sales of each product are summarized in Table 4.5. TABLE 4.5 DEMAND AND SALES INFORMATION FOR DAWSON ELECTRONICS Water Saver 1000 Greener Grass 5000 Probability of Dollar Sales ($1,000) Dollar Sales ($1,000) Occurrence With Capacity Expansion Low Demand 1,000 2,500 0.25 Medium Demand 2,000 3,000 0.50 High Demand 3,000 5,000 0.25 Without Capacity Expansion Low Demand 700 1,000 0.25 Medium Demand 1,000 2,000 0.50 High Demand 2,000 3,000 0.25 a. What is the expected payoff for Water Saver 1000 and the Greener Grass 5000, with and without capacity expansion? b. Which product should Denise choose to produce, and with which capacity expansion option?