Exam 17: Decision Making

Use the following to answer the questions below. A company that is introducing a new product has to choose between three different manufacturing methods,referred to as methods A,B,and C.Depending on the demand for the product,they have forecast different levels of revenue 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.2 -Using the information in Table A.2,which alternative is best in accordance with a decision criterion of minimax regret?

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?

The decision rule in decision making under uncertainty that would be best for the manager who has high expectations would be:

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.Which alternative is best,given the matrix payoff?

________ is a technique for systematically changing parameters in a model to determine the effects of such changes.

If a new alternative is added to a payoff table and the maximax criterion is applied again,the new decision must either remain with the original maximax alternative or the new alternative.

Commodore is debating whether to produce the printed circuit boards for a new line of video cameras or outsource their production to a company that specializes in this operation.Strictly from a cost standpoint,production of the circuit boards would definitely be outsourced if:

A company is screening ideas for new services.Four alternative service ideas are being considered.Management identified four criteria and weighted them as follows: A = 40,B = 30,C = 20,and D = 10.They have also come up with scored values for the five alternatives and the four criteria as shown following.Management has decided that if an alternative has less than a total scored value of 600,it should automatically be rejected.Use the preference matrix technique to determine which idea should be accepted.

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?

Under what conditions can decision trees be useful?

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.Which alternative is best in accordance with an optimistic outlook? Which alternative is best according to a pessimist?

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.What is the slope of the fixed-cost line for production in San Francisco?

The decision rule most appropriate for the realistic manager using decision making under uncertainty would be:

In order for a decision tree to be a valuable decision tool,the decision-maker should be in a condition of:

If the payoff table contains expenses instead of revenues,then the pessimistic criterion is Minimin.

If the payoff table contains expenses instead of revenues,then the optimistic criterion is Minimin.

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.For an annual volume of 3,000 units,which supplier should be chosen?

The Laplace criterion will reach the same decision as the Minimax Regret criterion when the payoff table contains expenses instead of revenues.

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.Which alternative should be selected if annual requirements are 5,000 units?

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 much does Luvmatics make for each Jumbo unit that is produced in Tuttle and sold at the listed price?