Wes Johnson is the principal owner of Johnson Oil, Inc. After quitting his university teachingjob, Wes has been able to increase his annual salary by a factor of over 100.At the present time, Wes is forced to consider purchasing some more equipment for JohnsonOil because of competition. Wes' alternatives are as follows:FavorableUnfavorableMarketMarketEquipment($)($)Sub 100300,000-200,000Oiler J250,000-100,000Tеxan75,000-18,000For example, if Wes purchases a Sub 100 and if there is a favorable market, he will realize aprofit of $300,000. On the other hand, if the market is unfavorable, Wes will suffer a loss of$200,000.But Wes has always been a very optimistic decision maker.Questions: Questions:1. What type of decision is VWes facing?2. What decision criterion should he use?3. What alternative is best?

Answered: 1. What type of decision is Wes facing?…

Business

Management

1. What type of decision is Wes facing? 2. What decision criterion should he use? 3. What alternative is best?

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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Question

Wes Johnson is the principal owner of Johnson Oil, Inc. After quitting his university teaching
job, Wes has been able to increase his annual salary by a factor of over 100.
At the present time, Wes is forced to consider purchasing some more equipment for Johnson
Oil because of competition. Wes' alternatives are as follows:
Favorable
Unfavorable
Market
Market
Equipment
($)
($)
Sub 100
300,000
-200,000
Oiler J
250,000
-100,000
Tеxan
75,000
-18,000
For example, if Wes purchases a Sub 100 and if there is a favorable market, he will realize a
profit of $300,000. On the other hand, if the market is unfavorable, Wes will suffer a loss of
$200,000.
But Wes has always been a very optimistic decision maker.
Questions:

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