1. Draw a decision tree for the following case. Current capacity: 20,000 units per year Two...

 

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1. Draw a decision tree for the following case. Current capacity: 20,000 units per year Two options are being considered: (a) Add additional capacity of 20,000 units at an annualized fixed cost of $15 million with labor cost of $600 per unit. (b) Outsource at a cost of $18,000 per unit. Draw the decision tree for two year time horizon. During each year, demand has an 70% chance of increasing 40% and 30% chance of remaining the same. 2. Draw a decision tree for the following case. Current demand: (In Asia) 3 million units per year. (In North America) 6 million units per year. Over the next two years, demand in Asia is expected to go up 40 % (0.6 probability) or go up by 20% (0.4 Probability). Demand in North America is expected to go up 20% (0.4 probability) or go down by 20% (0.6 Probability). Asia Production Facility: 3 million units per year, Variable cost: $20 North America Facility: 5 million units per year, Variable cost: $25 It costs $5 to ship between two markets. Each unit sells at $50 in both markets. Two options: (a) Add additional capacity of 3 million units costing $20 million (b) Add additional capacity of 2 million units costing $15 million Assuming a discount factor of 10% what is your recommendation? 1. Draw a decision tree for the following case. Current capacity: 20,000 units per year Two options are being considered: (a) Add additional capacity of 20,000 units at an annualized fixed cost of $15 million with labor cost of $600 per unit. (b) Outsource at a cost of $18,000 per unit. Draw the decision tree for two year time horizon. During each year, demand has an 70% chance of increasing 40% and 30% chance of remaining the same. 2. Draw a decision tree for the following case. Current demand: (In Asia) 3 million units per year. (In North America) 6 million units per year. Over the next two years, demand in Asia is expected to go up 40 % (0.6 probability) or go up by 20% (0.4 Probability). Demand in North America is expected to go up 20% (0.4 probability) or go down by 20% (0.6 Probability). Asia Production Facility: 3 million units per year, Variable cost: $20 North America Facility: 5 million units per year, Variable cost: $25 It costs $5 to ship between two markets. Each unit sells at $50 in both markets. Two options: (a) Add additional capacity of 3 million units costing $20 million (b) Add additional capacity of 2 million units costing $15 million Assuming a discount factor of 10% what is your recommendation?