Spectrum Hair Salon is considering expanding itsbusiness, as it is experiencing a large growth. Th e question iswhether it should expand with a bigger facility than needed,hoping that demand will catch up, or with a small facility,knowing that it will need to reconsider expanding in three years.Th e management at Spectrum has estimated the followingchances for demand:• Th e likelihood of demand being high is 0.70.• Th e likelihood of demand being low is 0.30.Estimated profi ts for each alternative are as follows:• Large expansion has an estimated profi tability of either$100,000 or $70,000, depending on whether demand turnsout to be high or low.• Small expansion has a profi tability of $50,000, assuming thatdemand is low.• Small expansion with an occurrence of high demand wouldrequire considering whether to expand further. If thebusiness expands at this point, the profi tability is expected tobe $90,000. If it does not expand further, the profi tability isexpected to be $60,000.Draw a decision tree and solve the problem. What shouldSpectrum do?
Critical Path Method
The critical path is the longest succession of tasks that has to be successfully completed to conclude a project entirely. The tasks involved in the sequence are called critical activities, as any task getting delayed will result in the whole project getting delayed. To determine the time duration of a project, the critical path has to be identified. The critical path method or CPM is used by project managers to evaluate the least amount of time required to finish each task with the least amount of delay.
Cost Analysis
The entire idea of cost of production or definition of production cost is applied corresponding or we can say that it is related to investment or money cost. Money cost or investment refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factor of production or factor services.
Inventory Management
Inventory management is the process or system of handling all the goods that an organization owns. In simpler terms, inventory management deals with how a company orders, stores, and uses its goods.
Project Management
Project Management is all about management and optimum utilization of the resources in the best possible manner to develop the software as per the requirement of the client. Here the Project refers to the development of software to meet the end objective of the client by providing the required product or service within a specified Period of time and ensuring high quality. This can be done by managing all the available resources. In short, it can be defined as an application of knowledge, skills, tools, and techniques to meet the objective of the Project. It is the duty of a Project Manager to achieve the objective of the Project as per the specifications given by the client.
Spectrum Hair Salon is considering expanding its
business, as it is experiencing a large growth. Th e question is
whether it should expand with a bigger facility than needed,
hoping that demand will catch up, or with a small facility,
knowing that it will need to reconsider expanding in three years.
Th e management at Spectrum has estimated the following
chances for demand:
• Th e likelihood of demand being high is 0.70.
• Th e likelihood of demand being low is 0.30.
Estimated profi ts for each alternative are as follows:
• Large expansion has an estimated profi tability of either
$100,000 or $70,000, depending on whether demand turns
out to be high or low.
• Small expansion has a profi tability of $50,000, assuming that
demand is low.
• Small expansion with an occurrence of high demand would
require considering whether to expand further. If the
business expands at this point, the profi tability is expected to
be $90,000. If it does not expand further, the profi tability is
expected to be $60,000.
Draw a decision tree and solve the problem. What should
Spectrum do?
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