5
DISCUSSION CHAPTER QUESTIONS
5.
CAD advantages include:
n lower cost and better designs
n feeding information forward to such departments as purchasing, manufacturing, and technical
documentation
n encouraging integration of information with all departments of a manufacturing organization
9.
The four phases of the product life cycle are:
(a)
introduction
(b)
growth
(c)
maturity
(d)
decline
END-OF-CHAPTER PROBLEMS
5.11
4,000
deluxe
(0.5)
good
400 125 35,000 = 15,000
(0.5)
not good
elegant 1,000
200 90 35,000 = 17,000
(0.5)
good
500 100 35,000 = 15,000
(0.5)
not good
400 70 35,000 = 7,000
do nothing
0
Produce the deluxe version; EMV is highest.
5.12
Sales
Revenue
Study
Cost
(0.6)
100,000 550
= 55,000,000
(0.4)
75,000 550
= 41,250,000
(0.7)
(75,000 750) 100,000 = 56,150,000
(0.3)
(70,000 750) 100,000 = 52,400,000
Proceed
49,500,000
55,025,000
Do study
The company should complete the value analysis for an expected payoff of $55,025,000.
Chapter 5: Design of Goods and Services
1
5.13
Fixed
Cost
Variable
Costs
(0.2)
45,000 + (200,000 0.45) = 135,000
65,000 + (200,000 0.45) = 155,000
(0.2)
65,000 + (200,000 0.40) = 145,000
(0.1)
65,000 + (200,000 0.35) = 135,000
(0.9)
(151,000)
45,000 + (200,000 0.50) = 145,000
(0.7)
Sub-contract
(0.5)
(0.3)
Low tech
(144,000)
45,000 + (200,000 0.55) = 155,000
75,000 + (200,000 0.40) = 155,000
(0.1)
75,000 + (200,000 0.35) = 145,000
High-tech
(154,000)
The firm should utilize the low technology approach for a cost of $144,000.
Good
(0.4)
5.14
1,000,000 start-up
Good
(0.9)
Make
(1,690,000)
(2,150,000)
Try again
Fail
(0.1)
Fail
(0.6)
Buy
(2,500,000)
Buy
(1,500,000)
(a)
(b)
(c)
1,000,000 start-up
1,000,000 re-design
2,000,000
1,000,000
1,000,000
1,000,000
500,000
3,500,000
start-up
re-design
vendor development
purchase pieces
1,000,000 start-up
1,000,000 vendor development
500,000 purchase pieces
2,500,000
1,000,000 vendor development
500,000 purchase pieces
1,500,000
The best decision would be to buy the semiconductors. This decision has an expected
payoff (cost) of $1,500,000.
Expected value, monetary minimum cost.
The worst that can happen is that Ritz fails at its attempt to make semiconductors, ends up
buying them instead, and spends $3,500,000.
The best that can happen is that they make the semiconductors and spend only $1,000,000.
5.15 The modified decision tree and the new payoffs are shown. We have made a second decision on
those branches where the yield was only 59 per 100 and have modified the payoffs by adding the
revenue and costs associated with the corrections of 5 units per 100. We then pruned those
2
Instructors Solutions Manual t/a Operations Management
branches with the lowest payoff (which, in both cases, was the branch labeled Do not correct).
Here are the EMV calculations:
EMV (Design A) = (0.9)($850,000) + (0.1)($1,100,000)
= $875,000
EMV (Design B) = (0.8)($750,000) + (0.2)($500,000)
= $700,000
Using the high payoff branches, we conclude that the expected monetary values are $875,000
from Design A and $700,000 from Design B. Therefore, the decision when King Electronics has
the option of correcting 5 units per 100 is to correct them and use Design A.
Decision Tree for Problem 5.15
Correct
5 per 100
Yield 59
(0.9)
EMV = $875,000
Do not
correct
(0.1)
Yield 64
Yield 64
$8,850,000 Sales 59,000 at $150
+ 750,000 Sales 5,000 at $150
$9,600,000
7,500,000 Mfg. cost 100,000 at $75
250,000 Correct 5 per 100 at $50
1,000,000 Design cost
$8,750,000
$850,000
$8,850,000 Sales 59,000 at $150
7,500,000 Mfg. cost 100,000 at $75
1,000,000 Design cost
$350,000
$9,600,000 Sales 64,000 at $150
7,500,000 Mfg. cost 100,000 at $75
1,000,000 Design cost
$1,100,000
$9,600,000 Sales 64,000 at $150
7,500,000 Mfg. cost 100,000 at $75
1,350,000 Design cost
$750,000
(0.8)
Correct
5 per 100
EMV = $700,000
(0.2)
$8,850,000 Sales 59,000 at $150
+ 750,000 Sales 5,000 at $150
$9,600,000
$7,500,000 Mfg. cost 100,000 at $75
250,000 Correct 5 per 100 at $75
1,350,000 Design cost
$9,100,000
$500,000
Yield 59
Do not
correct
Chapter 5: Design of Goods and Services
$8,850,000 Sales 59,000 at $150
$7,500,000 Mfg. cost 100,000 at $75
1,350,000 Design cost
0
3