1. Determine the profit maximizing average monthly production capacity for Derma PlusTM for each of the possible reference-based prices identified by the consultant. Estimate the expected monthly profit in each case.
2. Recommend an average monthly production capacity for the next 12 months given the uncertainty about the price of DermaPlusTM. Your recommendation will be used to set the size of the manufacturing plant's unionized workforce. (Note: You simply have to determine the best monthly production capacity for the next 12 months, not the number of workers required.)
3. Write a short report summarizing the results of your analysis and any recommendations.
Jeff makes it clear to you that he is a "risk neutral" person.
You only have a week to complete the analysis, interpret the results, and summarize your findings and recommendations in a brief report. When Jeff makes his recommendations about the structure and format of the report you realize that they are much the same for Assignment 1 that you completed at another company.
Finally, Jeff gives you a copy of one of Shawn's spreadsheets. This one contains data that Shawn collected on the variables he thought would be needed to estimate the short-run cost functions for DermaPlusTM and the firm's profit-maximizing output level.
Jeff makes it clear that he has complete confidence in Shawn's technical abilities and professional judgment and tells you to take the information in Shawn's spreadsheet at face value and to use it as a starting point for your analysis.