Production Operations Management HW Show your calculation steps Question 2 A toy manufacturer has three different mechanisms that can be installed in a doll that it sells The different mechanisms have three different setup costs (overheads) and variable costs and, therefore, the profit from the dolls is dependent on the volume of sales The anticipated payoffs are as follows Wind up action Pneumatic action Electrical action Probability Light Demand $325,000 $300,000 $400,000 0 25 Moderate Demand $190,000 $400,000 $420,000 0 45 Heavy Demand $170,000 $420,000 $800,000 0 3 a What is the EMV of each decision alternative b Which action should be selected c What is the expected value with perfect information d What is the expected value of perfect information

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Question: Production &Operations Management HW Show your calculation steps Question 2: A toy manufacturer has three different mechanisms that can be installed in a doll that

Production &Operations Management

Show your calculation steps

Question 2: A toy manufacturer has three different mechanisms that can be installed in a doll that it sells. The different mechanisms have three different setup costs (overheads) and variable costs and, therefore, the profit from the dolls is dependent on the volume of sales. The anticipated payoffs are as follows.

	Wind-up action	Pneumatic action	Electrical action	Probability
Light Demand	$325,000	$300,000	-$400,000	0.25
Moderate Demand	$190,000	$400,000	$420,000	0.45
Heavy Demand	$170,000	$420,000	$800,000	0.3

a. What is the EMV of each decision alternative?

b. Which action should be selected?

c. What is the expected value with perfect information?

d. What is the expected value of perfect information?

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