This paper circulates around the core theme of Which machine has the highest expected utility for the production manager? together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 99. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.
A company is planning to re-equip one of its major production plants
and one of two types of machine, the Zeta and the Precision II, is to be
purchased. The prices of the two machines are very similar so the
choice of machine is to be based on two factors: running costs and
reliability. It is agreed that these two factors can be represented by
the variables: average weekly operating costs and number of breakdowns
in the first year of operation. The company”s production manager
estimates that the following probability distributions apply to the two
machines. It can be assumed that the probability distributions for
operating costs and number of breakdowns are independent.Average
weeklyZetaoperating costs ($)Prob.No. of breakdownsProb.20
0000.6$00.1530 000$0$10.85
Precision IIAverage weekly
operating costs ($)Prob.No. of breakdownsProb.15 0000.500.235 000$110.7
20.1
Details of the manager”s utility functions for operating costs and number of breakdowns are shown below:Average weekly
operating costs ($)UtilityNo. of breakdownsUtility15 00010120 0000.810.930 0000.32035 0000
(a) The production manager”s responses to questions reveal that, for
him, the two attributes are mutually utility independent. Explain what
this means.(b) The production manager also indicates that for him k1 =
0.7 (where attribute 1 = operating costs) and k2 = 0.5. Discuss how
these values could have been determined.(c) Which machine has the
highest expected utility for the production manager?
