XYZ Is a Paint Product Manufacturer,and One of the Plants $\quad$

question 76

Multiple Choice

XYZ is a paint product manufacturer,and one of the plants is experiencing a substantial increase in demand.The future demand for the products could be low,medium,or high,with probabilities estimated to be 25%,50%,and 30%,respectively.The company wants to determine the financial impact associated with the three decision alternatives under the varying levels of demand.Given the following payoff matrix,the firm's manager should ______. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\quad$$\text { Demand }$
$\begin{array}{|c|c|c|c|}\hline \text { De cision alternative } & \mathbf{L o w}(20 \%) & \text { Medium (50\%) } & \text { High }(30 \%) \\\hline \begin{array}{c}\text { S ubcontract additional } \\\text { capacity }\end{array} & \$ 7 \text { million } & \$ 40 \text { million } & \$ 70 \text { million } \\\hline \text { Build a new plant } & -\$ 55 \text { million } & \$ 25 \text { million } & \$ 100 \text { million } \\\hline \text { Do nothing } & \$ 15 \text { million } & \$30 \text { million } & \$ 85 \text { million }\\\hline\end{array}$

• A)subcontract additional capacity.
• B)build a new plant.
• C)do nothing.
• D)expand the plant.

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