Decision tree diagram

Chapter 9

1. Joe’s Tasty Burger has determined that its production facility has a design capacity of 400 hamburgers per day. The effective capacity, however, is 250 hamburgers per day. Lately Joe has noticed that output has been 300 hamburgers per day. Compute both design and effective capacity utilization measures. What can you conclude?

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1. Beth’s Bakery can comfortably produce 60 brownies in one day. If Beth takes some unusual measures, such as hiring her two aunts to help in the kitchen and work overtime, she can produce up to 100 brownies in one day. (a) What are the design and effective capacities for Beth’s Bakery? (b) If Beth is currently producing 64 brownies, compute the capacity utilization for both measures. What can you conclude?

1. Demand has grown at Dairy May Farms, and it is considering expanding. One option is to expand by purchasing a very large farm that will be able to meet expected future demand. Another option is to expand the current facility by a small amount now and take a wait-and-see attitude, with the possibility of a larger expansion in two years. Management has estimated the following chances for demand:
• The likelihood of demand being high is 0.70.
• The likelihood of demand being low is 0.30.

Profits for each alternative have been estimated as follows:

• Large expansion has an estimated profitability of either \$40,000 or \$20,000, depending on whether demand turns out to be high or low.
• Small expansion has a profitability of \$15,000, assuming that demand is low.
• Small expansion with an occurrence of high demand would require considering whether to expand further. If the company expands at that point, the profitability is expected to be \$35,000. If it does not expand further, the profitability is expected to be \$12,000.

(a) Draw a decision tree diagram for Dairy May Farms.

(b) Solve the decision tree you developed. What should Dairy May Farms do?

Chapter 10

1. Use trial and error to find a better layout for Mason Machine Tools in Problem 3. Compute the ld score and compare it to Mason’s current and proposed layouts in Problem 3.

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