Question

Question 2 (20 martos) The maintenance manager of a manufacturing company is attempting to estimate the likely trage of a particular electrical component which is required for performing routine maintenance on the factory machinery. He has kept a record of usage of the component over the past 12 months, which was as follows: Units February March April May June July August September October November December Required: (a) Calculate the arithmetic mean, median, range and standard deviation of the component usage. (8 marks) (b) Comment on the usefulness to the maintenance manager of the measures that you have calculated in (a) above. (2 marks) The Managing Director of a company is deciding whether to build a large or small additional production facility to ensure that the company has sufficient operating capacity to satisfy current and future sales demand. In consultation with the company's senior management accountant, the following two possible scenarios in terms of the net present value of future cash flows from the alternatives are being considered. Possible Outcome Low Demand High Demand Build small facility 1700,000 1520,000 Build large facility 1420,000 12,100,000 It is estimated that there is a 60% probability that demand will be low and a 40% probability that demand will be high (e) Using the expected value decision rule, advise on the most profitable course of action (10 marks) (Question ? total: 20 marks)

Answer 1

		A	B=A-39	C=B^2
		Units	Deviation from Mean	Deviation Squared
	January	20	-19	361
	February	30	-9	81
	March	25	-14	196
	April	40	1	1
	May	50	11	121
	June	42	3	9
	July	37	-2	4
	August	65	26	676
	September	49	10	100
	October	27	-12	144
	November	53	14	196
	December	29	-10	100
	Total	467		1989
	Arithmatic Mean=Total/(Number of records)
	Arithmatic Mean=467/12	39
	Variance =1989/(12-1)	180.8181818
	Standard Deviation =	13	Square Root of (180.8182)
	Median:
	Arrange in descending order:
		Units
		65
		53
		50
		49
		42
		40
		37
		30
		29
		27
		25
		20
	Meadian is the middle value
	Meadian =(40+37)/2	39
	Range =Difference between maximum and minimum
	Range =65-20	45
	These data helps the manager in planning , arranging resources, because he will know the range ,mean ,median and standard deviation of requirenent
													ACTION: Build Small Facility: Demand Low High Probability Outcome 0.6 £ 700,000 0.4 £ 520,000 Total £ 628,000 Probability* Outcome £ 420,000 £ 208,000 £ 628,000 Expected Net Present Value ACTION: Build Large Facility: Demand Low High Probability Outcome 0.6 £ 420,000 0.4 £ 2,100,000 Total £ 1,092,000 Probability* Outcome £ 252,000 £ 840,000 £ 1,092,000 Expected Net Present Value Most Profitable Course of Action Build Large Facility: