Spencerville Products Expanding Operations West Mississippi First Step Build Manufacturing Q34318937

Spencerville Products is expanding its operations west of theMississippi. Its first step is to build a manufacturing facility inDenver to satisfy demand on the West Coast it will not produce anyitems not needed to meet demand. Spencerville has an option tobuild either a large facility that has an annual output of 500,000units per year or a smaller facility with an output of 250,000units per year. It must build one of these two facilities – it doesnot have any other options.

The expected demand for the company’s products is shown aseither high or moderate in the table below:

DemandLevel            Annual Demand(units/year)              Probability

High                                       450,000                           0.6

Moderate                                200,000                           0.4

The small

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