Exam 16: Supplement A Decision Making

Table A.2 Use the following to answer the questions below. A company that is introducing a new product has to choose between four different manufacturing methods, referred to as methods A, B, C and D. Depending on the demand for the product, they forecast different levels of expenses for the year (values are in thousands). The company has identified three possible states of nature for economic growth, and named them High, Medium, and Low. -Using the information in Table A.2, which alternative is best in accordance with a pessimistic outlook?

Mantel Incorporated began producing its new line of dolls at its Connecticut plant in December of year 0. In year 1, it produced 30,000 dolls at a total cost of $385,000. In year 2, its production increased to 80,000 dolls at a total cost of $885,000. Assuming the cost structure was the same for both years, what must be the variable cost (C) and the fixed cost (F) per doll?

Use this scenario to answer the following questions. A company must decide if it will make or buy an item it needs. The company can make the item for $10 per unit, but must invest $15,000 in tooling to achieve that capability. Alex Rogo has quoted a total price of $12 per unit to supply the quantity required (assume their fixed costs are included in the quoted price). -Refer to the instruction above. What is the break-even quantity in this situation?

________ is the portion of total cost that remains constant regardless of changes in levels of output.

An operations manager has developed this decision tree to evaluate the alternatives for a planned expansion. If the probability of high demand is 0.6, what is the best course of action?

Table A.1 Use the following to answer the questions below. A couple planning a vacation needs to choose between four different modes of transportation as shown in the table. Depending on the weather, either excellent, normal, or bad, they have estimated their daily comfort expenses. -Which alternative in Table A.1 performs best under the minimax regret criterion?

George Burdell must decide among four alternatives for an oil exploration project. He estimates that the probability of high demand is 0.3 and the probability of low demand is 0.7. What is the best choice with the payoffs shown in the tree?