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Operations management problem- design of goods and services

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You have a project to complete that your experts have indicated will take 6 weeks at a cost of $14,000 per week, regardless of which option you choose. However, some tasks within the options will get completed on time, and some will be late, no matter what you do - and there is an associated probability for each of the tasks within each of the options per the details below.
There is also a penalty of an additional $10,000 per task per week for every week late. In addition, there will be an extra penalty of $5,000 for every task that is MORE THAN 2 weeks late.

Option Weeks Late Probability

A 0 weeks 50%

4 weeks 50%

B 1 week 30%

2 weeks 20%

4 weeks 50%

C 0 weeks 50%

1 week 30%

4 weeks 20%

D 0 weeks 25%

1 week 30%

2 weeks 45%

ADJUSTMENT - - - After you have answered the first 2 questions, your contracting office has indicated that the additional $5,000 penalty is being assessed for every task that is MORE THAN 1 week late.

Which option will provide the lowest EMV?
Which option will provide the highest EMV?
After the penalty adjustment has been imposed, which option will provide the lowest EMV?
After the penalty adjustment has been imposed, which option will provide the highest EMV?

A. Option A
B. Option B
C. Option C
D. Option D

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Solution Summary

The solution examines operations management problems. A design of goods and services are provided.

Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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