Question

Macdonald​ products, inc., of​ clarkson, new​ york, has the option of ​(a) proceeding immediately with production of a new​ top-of-the-line stereo tv that has just completed prototype testing or ​(b) having the value analysis team complete a study. if ed​ lusk, vp for​ operations, proceeds with the existing prototype​ (option a), the firm can expect sales to be 80 comma 00080,000 units at ​$510510 ​each, with a probability of 0.370.37 and a 0.630.63 probability of 65 comma 00065,000 at ​$510510. ​if, however, he uses the value analysis team​ (option b), the firm expects sales of 80 comma 00080,000 units at ​$720720​, with a probability of 0.630.63 and a 0.370.37 probability of 65 comma 00065,000 units at ​$720720. value​ engineering, at a cost of ​$85 comma 00085,000​, is only used in option
b. which option has the highest expected monetary value​ (emv)? the emv for option a is ​$ nothing and the emv for option b is ​$ nothing. ​the

Answer 1

Answer: The expected monetary value of option a is $35,980,500  and the Expected monetary value of option b is $53,519,000 .

We follow these steps to arrive at the emv.

Option A    

Probability - c             Price per unit -p                No. of units - n            n*p* c

    0.37                              510                               80000                15096000  

    0.63                              510                                65000                20884500

Expected Monetary Value                                                          35980500

Option B    

  Probability - c     Price per unit -p                   No. of units - n            n*p* c

     0.63                               720                                   80000                 36288000

      0.37                               720                                   65000                  17316000

Total                                                                                            53604000

Less: Value engineering cost                                                               -85000

Expected Monetary Value                                                            53519000

Answer 2

The expected monetary value of option (a) is $35,980,500 and the Expected monetary value of option (b) is $53,519,000.

What is monetary value?

Monetary value is defined as the amount of monetary system or currency that would be interchanged for the selling of a good or service.

It is usually realised as the indefinite quantity or worth in cash that something has inside the opened market.

Nowadays, almost everything has monetary value, means everything is compared with the money.

Therefore, the computation of the monetary value are shown in the image below.

Learn more about the monetary value, refer to:

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