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The recent COVID 19 chaos in Hong Kong has triggered Mr. K. Kwong, an entrepreneur, to consider investing in a local surgical mask manufacturing plant.

The recent COVID 19 chaos in Hong Kong has triggered Mr. K. Kwong, an entrepreneur, to consider investing in a local surgical mask manufacturing plant.

Mr. K. Kwongs problem is to decide how large his plant should be. The annual returns will depend on both the size of his plant and a number of marketing factors related to the health situation of the Hong Kong society. After a careful analysis, Mr. K. Kwong developed the following payoff table:

Size of plant

Good market ($)

Fair market ($)

Poor market ($)

Small

120,000

50,000

-20,000

Medium

250,000

100,000

-50,000

Large

300,000

80,000

-100,000

Very Large

400,000

40,000

-200,000

For example, if Mr. K. Kwong constructs a small plant and the market is good, he will realize a profit of $120,000.

*Remarks: No need to include the Do Nothing option in decision table and decision tree

f) Mr. K. Kwong set up the plant finally after a few months. He starts the production line and wants a better understand its capability. Last week the plant produced 120,000 pieces of mask and the effective capacity is 130,000 pieces. The production line operates 6 days per week, with two 8-hours shifts per day. The line was designed to process the mask at a rate of 1,500 pieces per hour.

Determine the design capacity, utilization and efficiency for this plant when producing masks. (3 marks)

g) Later on, Mr. K. Kwong wants to increase production volume of masks due to a fourth wave of COVID 19 infections. To meet this sudden demand, he will be adding another production line. The second line has the same design capacity and the same effective capacity (130,000 pieces) as the first line. However, new staffs will be operating the second line. Quality problems such as damage of ear strap are expected to reduce output on the second line to 100,000 pieces (compared to 120,000 pieces on the first). Determine the new utilization and efficiency for the masks production after adding the second line. (3 marks)

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