Instructor: Dr. E. Gordon DeMeritt
STUDENT: ElisHA r. BUNDY
COURSE: MGT 511-115: Managing Operations and Services
ASSIGNMENT: CHAPTER 4 PROBLEMS 5 AND 6
DATE: September 15, 2013

Problem 5:
14,000,000
14,000,000

High Demand (.60)
$5,000,000
$5,000,000
10,000,000
10,000,000 Large Facility
$1,000,000
$1,000,000
Cost 9,000,000
Cost 9,000,000 Low Demand (.40)
$6,000,000
$6,000,000 High Demand (.60)
Expando Inc. Small Facility 12,000,000
12,000,000

$4,000,000
$4,000,000
Cost 6,000,000
Cost 6,000,000
10,000,000
10,000,000 Low Demand (.40)
Do Not Build
Do Not Build The company would realize the greatest amount of revenue by building a smaller facility. By building a smaller facility the company would recognize an opportunity cost increase of $1,000,000 in periods of high demand and $3,000,000 in periods of low demand.
Problem 6: Sell to Dept.St. (.70)
Sell to Dept.St. (.70) $1,000,000
$1,000,000
$4,000,000
$4,000,000

$2,000,000
$2,000,000
Sell to Ins. Co. (.30)
Sell to Ins. Co. (.30) Shopping Centers
$5,000,000
$5,000,000 New zoning (,60)
$1,500,000
$1,500,000
$4,500,000
$4,500,000
Cost 3,000,000
Cost 3,000,000 1,500 Apt.’s Sell to RIC (.60)
$0
$0 Builder Sell to RIC (.40)
$3,000,000
$3,000,000 600 homes
$400,000
$400,000
$2,400,000
$2,400,000 Current zone (,40)
Cost 2,000,000
Cost 2,000,000 Builder should build shopping centers to generate the greatest amount of revenue.