onsider the two capacity options for Arktec Manufacturing shown below. Suppose the company has identified the following three possible demand scenarios.

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a. The expected cost for Option 1 is

$enter your response here.

(Enter your response as a whole number.)

The expected cost for Option 2 is

$enter your response here.

(Enter your response as a whole number.)

Based on the given information, the best choice is

Option 1

Option 1

Option 2

.

b. Suppose the lowest and highest demand levels are updated to

60,000

and

165,000,

respectively.

The expected cost for Option 1 is now

$enter your response here.

(Enter your response as a whole number.)

The expected cost for Option 2 is now

$enter your response here.

(Enter your response as a whole number.)

Based on the new information, the best choice is

Option 2

Option 1

.

c. Draw the decision tree for Arktec Manufacturing (using the initial information used in part a). When drawing your tree, assume that managers must select a capacity option before they know what the demand level will actually be. Choose the correct decision tree below. capacity option before they know what the demand level will actually be. Choose the correct decision tree below.

A.

40,000

30%

$850,000

65,000

140,000

40,000

65,000

140,000

40%

30%

30%

40%

30%

$975,000

$1,350,000

$880,000

$1,180,000

$2,080,000

Forecast

Probability

Cost

Expected

Option 1

Option 2

Demand

Outcome

Capacity

Option

Decision