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Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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
Transcribed Image Text:OPTION
3) Once a product is defined, what documents are used to assist production personnel in its
manufacture?
Internal
Engineers
External
Engineers
4) De León Engineering designs and constructs air conditioning and heating 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 because 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 León has estimated that it
will cost $12,000 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 $90,000 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 $50,000. De
León Engineering would then complete the rest of the design and control systems at an
estimated cost of $30,000.
Joint Design
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:
ON
TIME
2
CHINES
1 WEEK
LATE
5
PRE
CO
PROBABILITY OF COMPLETING THE DESIGN
A
3
de chant
t
DO
2 WEEKS
LATE
3
3 WEEKS
LATE
What is the best decision based on an expected monetary value (EMV) criterion? (Note: You
want the lowest EMV because we are dealing with costs in this problem.
A manufacturer of disk drives for notebook computers wants an MTBF of at least 50.000
Expert Solution
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