CHAPTER 5

4.
YEARLY DEMAND
1 (in 000s) 2 (in 000s) 3 (in 000s) 4 (in 000s)
Plastic 90 30 41 51 52
Plastic 180 12 14 17 17
Plastic 360 50 51 62 70
Bronze 90 4 5 11 15
Bronze 180 1 3 4 16
Bronze 360 11 10 15 20

3 Bronze machines each produces 17.500 / year with 2 operators

1 Plastic machine produces 310.000 / year with 4 operators

YEAR
1 (in 000s) 2 (in 000s) 3 (in 000s) 4 (in 000s)
Plastic 92 106 130 139
Bronze 16 18 30 51

Bronze total capacity is 52.500 ( 3 machines x 17.500 (capacity of each machine))

Plastic total capacity is 310.000 ( 1 machine x 310.000 (capacity of machine))

Bronze
Year 1 Year 2 Year 3 Year 4
Capacity utilization
rate (capacity used
/ best operating 30% 34% 57% 97%
level)

Machine
requirement (3 0,9 1,02 1,71 2,91
machines)
Labor requirement 1,8 2,04 3,42 5,82
(2 operators)
 Plastic
Year 1 Year 2 Year 3 Year 4
capacity utilization
rate (capacity used
/ best operating 30% 34% 42% 45%
level)

machine
requirement (1
0,3 0,34 0,42 0,45
machine)

Labor requirement
1,2 1,36 1,68 1,8
(4 operators)

From the presented information, we can see that there is an insufficient labor required
(operator) in year 2, year 3 and 4 for the Bronze sprinkle production.

8.

Alternative Revenue Cost Value

Build small facility, low demand $10.000.000 $6.000.000 $4.000.000
Build small facility, high demand $13.000.000 $6.000.000 $7.000.000
Build large factory, low demand $11.000.000 $10.000.000 $1.000.000
Build large factory, high demand $15.000.000 $10.000.000 $5.000.000
  Small facility = $7.000.000 (0.6) + $4.000.000 (0.4) = $5.800.000
 Large factory = $5.000.000 (0.6) + $1.000.000 (0.4) = $3.400.000

Based on the decision tree, Expando, Inc should build small factory