(Answered) : Question 1 Options Changing Capacity Nothing Add Small Facility Add Large Facility Capacit Q28212262

Question 1

We have options for changing capacity:

– Do nothing, add small facility, or add large facility

– More capacity = higher fixed costs

– Lower capacity = higher variable costs

– Compare production potential against possible demand

Question 2

A manufacturer is considering switching vendors to get higherquality inputs. After substantial research, we have gathered thefollowing information:

Cost of breaking contract with existing vendor is $1m

Distribution of potential payoffs after switching:

– 70%: $2.5m

– 30%: $0.5m

Alternately, we can ask the current