Exam 17: Decision Making

Use the following to answer the questions below. In choosing between three new jobs,Joe MBA considers the potential payoffs over the next three years.The following table contains the payoffs,given the speed of promotion in each of the organizations.The probability of fast promotion is 0.6,and the probability of slow promotion is 0.4. Table A.4 -Use the information in Table A.4 and the expected-value rule.Which statement is TRUE?

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 have 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. Table A.3 -Using the information in Table A.3,which alternative is best in accordance with a pessimistic outlook?

Which condition would result in invalidating an application of break-even analysis?

Use the following to answer the questions below. Luvmatics plans to produce a new product.Three different models are planned: the Regular,Large,and Jumbo.The fixed costs depend on which of two locations are used;in San Francisco the fixed costs would be $2.5 million per year,but in Tuttle the fixed costs would be $1.2 million.Sale prices and variable costs for the three models are shown in the table. Table A.1 -Use the information in Table A.1.How many units of the Regular size must be sold each year to break even if production is at the San Francisco plant?

The break-even quantity is the volume at which the total revenue equals total cost.

Choosing the alternative that is the best weighted payoff using decision making under uncertainty would be:

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

A new product that will sell for $75.00 has variable costs of $38.00 per unit.Fixed costs of $75,000 must be incurred every year to manufacture this product.What is the annual volume to break even?

When using decision tree analysis:

A(n)________ is a schematic model of alternatives available to the decision maker,along with their possible consequences.

Use the following to answer the questions below. 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 do so.An outside firm 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 does the company save for the year by selecting this low-cost option (for annual requirements of 5,000 units)?

Why should a decision maker engage in sensitivity analysis?

Choosing the alternative that is the "best of the worst" using decision making under uncertainty would be:

If probabilities for events can be estimated,then the situation faced by the decision maker is called ________.

A manufacturing firm is considering whether to produce or outsource the production of a new product.If they produce the item themselves,they will incur a fixed cost of $950,000 per year,but if they outsource overseas there will be a $1.5 million cost per year.The advantage of outsourcing overseas is the variable cost of 95¢ per unit,which is a fraction of their $43/unit cost in their own union shop.Regardless where these devices are made,they will sell for $98 each.What is the break-even quantity for each alternative? Solve this problem graphically and algebraically.

Decision trees are typically used in the situation of decision making under ________.

Use the following to answer the questions below. A company is considering two suppliers for the purchase of a part needed for manufacturing.Particulars are as follows: -Refer to the instruction above.What is the annual break-even quantity for choosing between the two suppliers?

Analyze the following decision tree.After determining the missing probabilities,identify which alternative (Option 1 or Options 2)has the higher expected payoff.What is the expected payoff? .

A single factory produces two different products during each half of the year with equivalent fixed cost;from January through June they produce Product A and from July through December they produce Product B.Product A costs twice as much to produce and is sold at twice the price of Product B.Derive an expression relating the break-even quantity of Product A to that of Product B.

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 have 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. Table A.3 -Using the information in Table A.3,which alternative is best if further study revealed that the probability of high growth is 0.2,the probability of medium growth is 0.5,and the probability of low growth is 0.3?