Toyota

Exercise 3: Determining Production Capacity inescapable at Toyota Motor Manufacturing of Canada (TMMC) Decision trees are another meaning(a) if contend world-class operations management method which operations managers should find out and with which other managers should be familiar. This exercise illustrates how using a decision tree, determination of an optimal proceeds subject resource john be made from among several possible force options ground on the provided probable market conduct and expect addresss/payoffs of level(p)ts that beguile the options. It is spring 2000, and TMMC has indeed just been chosen to produce the cutting Lexus RX 330 caper, with the first units deliverable in 2003. Toyota moldiness now influence the amount of one-year production capacity it should general anatomy at TMMC. Toyotas goal is to maximize the pay from the RX 330 line over the flipper years from 2003-2007. These vehicles will sell for an just of $37,000 and incu r a mean unit production speak to of $28,000 (here, $ = the Canadian dollar). 10,000 units of annual production capacity can be built for $50M (M=million) with surplus pulley blocks of 5,000 units of annual capacity severally cost $15M. Each block of 5,000 units of capacity will also cost $5M per year to maintain, even if the capacity is unused.

Assume that the number of units actually sold each year will be the lesser of the demand and the production capacity. Marketing has provided three vehicle estimated demand scenarios with associated probabilities as follows: get hold of 2003 2004 2005 2006 2007 Probability Low 10,000 10,500 11,000 ! 11,500 12,000 0.25 Moderate 15,000 16,000 17,000 18,000 19,000 0.50 exalted 20,000 24,000 26,000 28,000 30,000 0.25 a. To maximize profit earned during this period, which production capacity should TMMC in 2000 decide to build - 10,000, 15,000, 20,000, 25,000, or 30,000 cars? Justify your choice. b. What are the weaknesses or limitations in this summary? How...If you want to get a climb essay, order it on our website: BestEssayCheap.com

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