Professional Documents
Culture Documents
Problem (Chapter 4)
1. AlwaysRain Irrigaion,Inc., would like to determine capacity requirements for the
next four
years. Curently two production lines are in place for making bronze and plastic
sprinklers. Three types of sprinklers are available in both bronze and plastic :
90-degree nozzle sprinklers, 180 degree nozzle sprinklers, and 360 degree nozzle
sprinklers. Management has forecast demand for the next four years as follows :
year demand 2 (in 000s) 3 (in000s) 44 55 16 17 55 64 8 9 4 5 12 15
plastic 90 plastic 180 plastic 360 bronze 90 bronze 180 bronze 360
1 (in 000s) 32 15 50 7 3 11
4 (in000s) 56 18 67 10 6 18
Both production lines can produce all the different types of nozzles. The bronze
machines needed for the bronze sprinklers require two operators and can produce up
to 12.000 sprinkles. The plastic injection molding machine needed for the plastic
sprinkles requires four operators and can produce up to 200.000 sprinkles. Three
bronze machines and only one injection molding machine are available. What are the
capacity requirements for the next four years ? (assume that there in no learning)
ANSWER : 3 Bronze machine : each 12.000 / year with 2 operator 1 Plastic machine :
each 200.000 / year with 4 operator Year 1 (in 000s) Plastic Bronze 97 21 2 (in
000s) 115 24 3 (in 000s) 136 29 4 (in 000s) 141 34
Bronze Percentage capacity utilized (%) Machine requirement Labor requirement 58,33
1,75 3,5 66,67 2,00 4 80,56 2,42 4,83 94,44 2,83 5,67
campaign for the bronze sprinkles, which are more expensive but also more durable
than the plastic ones. Forecast demand for the next four year as follows : year
demand 2 (in 000s) 3 (in000s) 44 55 16 17 55 64 15 18 5 6 16 17
plastic 90 plastic 180 plastic 360 bronze 90 bronze 180 bronze 360
1 (in 000s) 32 15 50 11 6 15
4 (in000s) 56 18 67 23 9 20
What are the capacity implications of the marketing campaign (assume no learning) ?
ANSWER :
1 Plastic machine : each 200.000 / year with 4 operator Year 1 (in 000s) Plastic
Bronze 97 32 2 (in 000s) 115 36 3 (in 000s) 136 41 4 (in 000s) 141 52
Bronze Percentage capacity utilized (%) Machine requirement Labor requirement 88,89
2,67 5,33 100 3 6 113,89 3,42 6,83 144,44 4,33 8,67
We can see that there is insufficient machine production and labor resource in year
3 and 4 for bronze sprinklers production.
SINDIKAT 2
Expected value for the alternative of building small facility : Small Facility =
( 6 million * 0,4 ) + ( 4 million * 0,6 ) = 4,8 million
Expected value for the alternative of building large factory : Small Facility = ( 5
million * 0,4 ) + ( 1 million * 0,6 ) = 2,6 million
Our analysis indicates that our best decision is building small factory.
6. A builder has located a piece of property that she would like to buy and
eventually build on. The land is currently zoned for four homes per acre, but she
is planning to request new
SINDIKAT 2
zoning. What she builds depends on our approval of zoning requests and your
analysis of this problem to advise her. With her input and your help, the decision
process has been reduced to the following costs, alternatives and probababilities:
Cost of land: $2 million Probability of rezoning: .60. If the land is rezoned,
there will be additional costs for new roads, lighting and so onm of $1million. If
the land is rezoned, the contractor must decide whether to build a shopping center
or 1.00 apartments that the tentative plan shows would be possible. If she builds a
shopping center, there is a 70 percent chance tthat she can self the shopping
center to a large departtment chain for $4 million over her constructionn cost
which excludes the land: and there is a 30 percent chance that she can sell it to
an insurance company for $5 Million over her construction cost (also excluding the
land). If, insdttead of the shopping center, she decides to build the 1.500
apartemenets, she places probabilities on the profits as follows : there is a 60
percent chance that she can sell the apartements to a real estate invesment
corporation for $3,000 each over her construction cost ; there is 40 percent chance
that she can get only $2,000 each over her costruction cost. (both exclude the land
cost) If the land is not rezoned, she will compy with the existting zoning
restrcyions and simply build 600 homes, on which she expects to make $4,000 over
the construction cost each one (excludingg the cost of land). Draw a decision tree
of the problem and determine the best solution and the expected net profit .
ANSWER :
Here are one decision point ( show with the square nodes) and two chance
occurrences (round nodes). Alternative 1. Rezone, shopping center, large department
chain 2. Rezone, shopping center, insurance company 3. Rezone, 1500 apartments,
$3.000 each 4. Rezone, 1500 apartments, $2.000 each 5. Not rezone, build 600 homes,
$4.000 each. Here is decision tree analysis : Revenue $4 million $5 million $4,5
million $3 million $2,4 million Cost $3 million $3 million $3 million $3 million $2
million Value $1 million $2 million $1,5 million $0 $0,4 million
SINDIKAT 2