Includeanswers to the following:

Case 1: Bell Computer CompanyCompute the expected value for the profit associated with the two expansion alternatives.Which decision is preferred for the objective of maximizing the expected profit?Compute the variation for the profit associated with the two expansion alternatives. Whichdecision is preferred for the objective of minimizing the risk or uncertainty? Case 2: Kyle Bits and BytesWhat should be the re-order point? How many HP laser printers should he have in stock Case 1: Bell Computer CompanyThe Bell Computer Company has two expansion options: medium scale, and large scale. For both medium scale expansion and large scale expansion, demand can be low, medium, or high with probability of 0.2, 0.5, and 0.3 respectively. For medium scale expansion, profits in case of low, medium and high demand are $50,000 , $150,000 and $200,000 respectively. For large scale expansion, profits in case of low, medium, and high demand are $0, $100,000 and $300,000 respectively. Management is facing dilemma whether to go for medium scale expansion or large scale expansion. While large scale expansion has potential to generate higher profit in case of high demand, the large scale expansion will generate lower profit than medium scale expansion in case of low and medium demand. In case of low demand, the large scale expansion results in nil profit. Clearly, large-scale expansion bears more risk than the low-scale expansion.The expected value is an anticipated value of an action. An action has multiple possible outcomes. First, we need to determine probability of occurrence of each outcome. The expected

value is calculated by multiplying each possible outcomes by probability of occurrence of that outcome, and adding all those values. (Hossein, 2014) Expected value of medium scale expansion and large scale expansion will help the management choose the expansion option that is most likely to generate higher profit.The expected value of two alternatives are:Medium scale expansion: $145Large scale expansion: $140The medium scale expansion alternative has higher expected value than large-scale expansion project. Thus, medium-scale expansion is preferred for the objective of maximizing expected profit.Merely knowing expected value is not enough to take an informed decision. It is also important to know how profits can deviate from the expected value. For this purpose, variance is used. Variance measures how far a set of random values are spread from the mean value. Higher