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can you assist me in completing this equation.
Consider the home remodeling construction project you worked on in the previous assessments. From the project manager’s viewpoint, it is essential to have a quantitative risk analysis for each task.
Complete the risk analysis for the tasks provided in the table below. Indicate a range of 0-10 (0 is the lowest, 10 is the highest) in the appropriate risk attributes columns: Severity, Likelihood and Ability to detect risk for each of the risks. Discuss the reasons for the values you assigned to each risk.
Add a new column to this table called “Quantitative risk priority number RPN”; RPN needs to be computed as follows: S*L*D. What conclusions do you draw based on the RPN numbers for each task?
| Home Remodeling Quantitative Risk Analysis Table | ||||
| Severity (S) | Likelihood (L) | Ability to Detect (D) | ||
| Surveying & Design | Repeated Work due to a change of design/structure | |||
| Prolonged consultation on structural plan | ||||
| Design Construction | Prolonged consultation on new design plan | |||
| Prolonged consultation on materials to be used | ||||
| Suspension or delay due to an accident | ||||
| Suspension or delay due to environmental measures | ||||
| Construction Work | Suspension or delay due to the unexpected discovery of an unwanted previous structure | |||
| Shortening or delay due to mistakes in measures for adjacent structures | ||||
| Delay due to an administrative factor, such as budget cut | ||||
| Remodeling through coordination with the owners concerned | ||||
| Post-Opening | Rehabilitation of damage due to an accidental damage | |||
| Environmental Measures | ||||
Question 2:
The yearly demand for a seasonal, profitable item follows the distribution below:
| Demand in Units | Probability |
|---|---|
| 1000 | 0.20 |
| 2000 | 0.30 |
| 3000 | 0.40 |
| 4000 | 0.10 |
A manufacturer is considering launching a project to produce this item and could produce it using one of three methods:
Use existing tools at a cost of $6 per unit
Buy cheap, special equipment for $1000. The value of the equipment at the end of the year is zero. The cost would be reduced to $3 per unit.
Buy high-quality special equipment for $10,000 that can be depreciated over four years (that is one-fourth of the cost ca be depreciated each year). With this equipment, the cost will be $2 per unit.
Set up this project as a decision tree to find whether the manufacturer should approve this project. If so, which method of production would maximize the profit. Complete this exercise by comparing the total annual costs. Assume production must meet all demand; each unit produced and sold means more profit.
Expert Answer
High-quality equipment can be depreciated over 4 years. Therefore, fixed annual cost of buying high-quality equipment = 10000/4 = 2500
In the decision tree, total cost of production is shown (therefore negative numbers). Total cost of production = Fixed cost + Variable cost per unit * demand.
Decision tree is following
We see that minimum expected total cost is of High-quality equipment. Therefore it is the optimal decision.
