12 Jul PARTS FOR DOMESTIC APPLIANCES.
You are required to analyse the following problems and discuss an appropriate decision making or modelling approach for your proposed solution.
Q5. Lars Van Hoek is about to install a new machine for making parts for domestic appliances. Three suppliers have made bids to supply the machine. The first supplier offers the Basicor machine, which automatically produces parts of acceptable, but not outstanding, quality. The output from the machine varies (depending on the materials used and a variety of settings) and might be 1,000 a week (with probability 0.1), 2,000 a week (with probability 0.7) or 3,000 a week. The net profit for the machine is $4 a unit. The second supplier offers a Supertamp machine, which makes higher quality parts. The output from this might be 700 a week (with probability 0.4) or 1,000 a week, with a net profit of $10 a unit. The third supplier offers the Switchover machine, which managers can set to produce either 1,300 high-quality parts a week at a profit of $6 a unit, or 1,600 medium-quality parts a week with a profit of $5 a unit. If the machine produces 2,000 or more units a week, Lars can export all production as a single bulk order. Then there is a 60% chance of selling this order for 50% more profit, and a 40% chance of selling for 50% less profit. What should Lars do to maximize the expected profit?
Q6. Sunseel industries produces different types of raw materials and it is interested is using simulation to estimate the profit per unit for its new product x. the selling price for the product will be $40 per unit. Probability distributions for the raw material cost, the production cost, and the marketing cost are estimated as follows:
Raw material cost($)
Probability
Production
Cost($)
Probability
Marketing
Cost($)
Probability
16
0.20
10
0.25
5
0.40
18
0.30
11
0.45
6
0.60
20
0.35
12
0.30
22
0.15
a.compute profit per unit for the base case, worst case, and best case.
b.construct a simulation model to estimate the mean profit per unit.
management believes the project may not be sustainable if the profit per unit is less than $2. Use simulation to estimate the probability the profit per unit will be less than $2.
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