Vaxidene is a drug that is very critical in treatment of meningitis, and there can be possible epidemics in the Southwes
Posted: Sat Feb 19, 2022 3:06 pm
Vaxidene is a drug that is very critical in treatment of
meningitis, and there can be possible epidemics in the Southwest of
the USA. It is expected that the demand for Vaxidene in 2022 in the
entire Arizona state (and the probability of each scenario) will be
as follows:
Low demand
30,000 doses
With probability 0,2
Medium demand
60,000 doses
With probability 0,7
High demand
80,000 doses
With probability 0,1
The main producer and distributor of this drug in Arizona state
is a company called Baxter Pharmaceuticals. In the current
manufacturing facility, which is located in Phoenix, AZ, Baxter
Pharmaceuticals can produce up to 50,000 doses per year. The cost
of producing a single dose is $16 and each dose sells at a price of
$30. However, the company is also considering the expansion
opportunity: By investing in larger, more technologically advanced
equipment, it is possible to increase the production capacity to
80,000 per year. Also the variable cost of producing a single
Vaxidene dose decreases by this investment, to a level of $15.
However, the expansion requires a fixed cost of $300,000.
(If you like, you can make a quantitative analysis (hint: you
can use decision trees, expected value analysis, etc.) to assess
the risk associated with the capacity expansion decision. Please
make sure to give clear recommendations about the possible risk
mitigation strategies for Baxter Pharmaceuticals.)
meningitis, and there can be possible epidemics in the Southwest of
the USA. It is expected that the demand for Vaxidene in 2022 in the
entire Arizona state (and the probability of each scenario) will be
as follows:
Low demand
30,000 doses
With probability 0,2
Medium demand
60,000 doses
With probability 0,7
High demand
80,000 doses
With probability 0,1
The main producer and distributor of this drug in Arizona state
is a company called Baxter Pharmaceuticals. In the current
manufacturing facility, which is located in Phoenix, AZ, Baxter
Pharmaceuticals can produce up to 50,000 doses per year. The cost
of producing a single dose is $16 and each dose sells at a price of
$30. However, the company is also considering the expansion
opportunity: By investing in larger, more technologically advanced
equipment, it is possible to increase the production capacity to
80,000 per year. Also the variable cost of producing a single
Vaxidene dose decreases by this investment, to a level of $15.
However, the expansion requires a fixed cost of $300,000.
(If you like, you can make a quantitative analysis (hint: you
can use decision trees, expected value analysis, etc.) to assess
the risk associated with the capacity expansion decision. Please
make sure to give clear recommendations about the possible risk
mitigation strategies for Baxter Pharmaceuticals.)