Exam 16: Decision Making

Table A.3 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. -Use the information in Table A.3.Which alternative is BEST,given the matrix payoff?

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?

The decision rule ________ chooses the alternative that is the "best of the best."

California Manufacturing,Inc.is now evaluating two new product ideas,and management has decided to apply the preference matrix method.The following table shows five criteria with different weights and individual scores of each product idea.If management has established a threshold of 800,which product(s)should be accepted for further development?

The Forsite Company is screening three new product ideas.Resource constraints allow only one idea to be commercialized at the present time.The following estimates have been made for the five performance criteria that management feels are most important.If the five criteria are equally weighted,what are the best and worst alternatives?

Making a decision under risk using the expected value criterion is the equivalent of using the Laplace decision rule under uncertainty.

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?

The break-even quantity for a certain kitchen appliance is 6000 units.The selling price is $10 per unit,and the variable cost is $4 per unit.What must be the fixed cost to break even at 6000 units?

The variable cost is the portion of total cost that remains constant regardless of changes in levels of production.

Given a payoff table in a decision making under risk scenario,what value is derived from applying the following decision rule? Apply all four criteria presented in your book and choose the alternative that is selected more frequently than the others.

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 decision criterion of minimax regret?

Use the following information to answer the questions below. You currently make a part for old equipment at a cost of $20 / unit.The annual fixed cost for this equipment is $50,000.You have found an outside supplier who will make the part for $15 / unit if you will pay their annual fixed costs of $200,000 / year (see table). -Refer to the instruction above.For what range of output would you prefer to make?

Use the following information to answer the questions below. You currently make a part for old equipment at a cost of $20 / unit.The annual fixed cost for this equipment is $50,000.You have found an outside supplier who will make the part for $15 / unit if you will pay their annual fixed costs of $200,000 / year (see table). -Refer to the instruction above.For what range of output would you prefer to buy?

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

Why should a decision maker engage in sensitivity analysis?

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?

A payoff table shows the amount for each alternative if each possible event occurs.

The average probability,P(E),for all branches leaving an event node is 1/n,where n is the number of branches leaving that event node.

Under what conditions can decision trees be useful?

By definition,the maximax and maximin criteria cannot result in the selection of a common alternative in decision making under uncertainty.