Exam 16: Decision Making

Pops has a cost function of 3x2-25x + 34,374.74 and a revenue function of 5x2.Using Excel (or algebra),determine a breakeven point.What is their fixed cost? What is their break-even point in both units and dollar sales?

The site selection team you formed last quarter meets with you in the conference room to present the results of their thoughtful analysis.They have collectively logged 200,000 frequent flyer miles while conducting their investigation.The conference room table sags under the weight of their massive report and all team members sport deep tans.As the leader drones on about their completely objective approach to the problem he projects a slide containing the following information about their location of choice. What questions do you,a conscientious vice-president level executive,have for the team about this portion of their analysis?

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

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.What does the company save for the year by selecting the low-cost option (for annual requirements of 40,000 units)?

Choosing the alternative that minimizes lost-opportunity costs using decision making under uncertainty would be:

Analyze the following decision tree.Determine the missing probabilities,and identify the alternative that maximizes the expected payoff.

Which one of the following statements about break-even analysis for evaluating products or services is TRUE?

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

What is the total cost if the beekeeper keeps 8 hives?

The decision rule ________ chooses the alternative with the best weighted payoff.

The decision rule ________ is also referred to as the optimist's criterion.

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 forecasted 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 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). -Refers to the instruction above.What are total costs to buy an annual quantity of 40,000 units?

Maximax is a decision rule for the pessimist.

A poultry farmer is debating whether to acquire Rhode Island Reds or Buff Orpingtons to lay the eggs he wants to sell.The fixed costs for the Buffs would be $7500 and the variable costs per egg would be a dime per egg.The Reds would have a fixed cost of $6000 and a variable cost of fifteen cents.At what level of egg production would the poultry farmer be indifferent between Rhode Island Reds and Buff Orpingtons?

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

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 below.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.

A company faces a fixed cost of $568 and sells items at a 50% markup on their cost of $12.What is their break-even point in both units and dollar sales?

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?

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