SCENARIO 5-12
Two Different Designs on a New Line of Winter

question 97

Short Answer

SCENARIO 5-12
Two different designs on a new line of winter jackets for the coming winter are available for your
manufacturing plants. Your profit (in thousands of dollars) will depend on the taste of the consumers
when winter arrives. The probability of the three possible different tastes of the consumers and the
corresponding profits are presented in the following table. $$\begin{array} { | c | c | r | r | } \hline \text { Probability } & \text { Taste } & \text { Design A } & \text { Design B } \\\hline 0.2 & \text { more conservative } & 180 & 520 \\\hline 0.5 & \text { no change } & 230 & 310 \\\hline 0.3 & \text { more liberal } & 350 & 270 \\\hline\end{array}$$
-Referring to Scenario 5-12, if you decide to choose Design A for 10% of the production lines and
Design B for the remaining production lines, what is the risk of your investment?

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Definitions:

Direct Labor Hours

A measure of the work effort contributed by employees who are directly involved in manufacturing goods or providing services, essential for cost and efficiency analysis.

Constrained Resource

A factor of production that limits the output or growth of a process, such as limited raw materials, labor, or machine capacity.

Profitable Use

Utilizing resources or an asset in a manner that generates a favorable financial return.

Current Profitability

A measure of a firm's current financial performance, often assessed by examining current income and profitability ratios.