Question: Question 3 CPLEX Corp. would like to install a new computer system, which must be completed in 10 months. Or else, there would be a

Question 3 CPLEX Corp. would like to install a

Question 3 CPLEX Corp. would like to install a new computer system, which must be completed in 10 months. Or else, there would be a penalty cost (i.e. ineffective use of resources, extra manpower, etc.) of $5000 for each month beyond 10 months until completion. The direct costs of the installation involves an overhead cost of $1000 per month until completion. own team, The company has two options, either to set up its own team internally or outsource to another company, LINGO Co., for the installation If CPLEX Corp. uses there is a 10% chance that the installation can be completed in 9 months, 60% chance to be completed in 10 months, and 30% chance to be completed in 11 months. On the other hand, if the project is outsourced to LINGO Co., there is a 20% chance that the installation can be completed in 8 months, 40% chance to be completed in 9 months, 30% chance to be completed in 10 months, and 10% chance to be completed in 11 months. LINGO Co. not only charges an initial cost of $2000 for the job, but also requires CPLEX Corp. to pay a bonus of $800 per month saved below 10 months. Draw a decision tree for this problem and calculate the EMV for all courses of action. Hence, determine the optimal choice of CPLEX Corp. based on the EMV enterion

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