Exam 16: Decision Making

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

Which one of the following statements about break-even analysis,as we applied it to evaluating products or services,is BEST?

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 and the Laplace decision rule.The weighted payoff is:

A new minor league baseball team is coming to town and the owners have decided to build a new stadium,either small or large.The success of the team with regard to ticket sales will be either high or low with probabilities of 0.75 and 0.25,respectively.If demand for tickets is high,the large stadium would provide a payoff of approximately $20 million.If ticket sales are low,the loss on the large stadium would be $5 million.If a small stadium is constructed,and ticket sales are low,the payoff is $500,000 after deducting the cost of construction.If ticket sales are high,the team can choose to build an upper deck,or to maintain the existing facility.Expanding the stadium in this scenario has a payoff of $10 million,whereas maintaining the same number of seats has a payoff of only $3 million. a.Draw a decision tree for this problem. b.What should management do to achieve the highest expected payoff?

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

When faced with a decision where multiple non-financial criteria should be assessed,the savvy manager should employ a(n)________ as a decision tool.

A(n)________ shows the amount of revenue for each alternative if each possible event occurs.