Zynex Co manufactures a range of electronic devices, which it sells to online storesand retail outlets. It has a risk-seeking attitude and its objective is to maximise profit.Six months ago it released a new version of its smartphone, the ZV. Zynex Co's mainsmartphone competitor has announced that it will launch a new version of itssmartphone in one month's time and Zynex Co is concerned about the effect of thelaunch of this rival product on future demand for the ZV.For each of the previous ten smartphones launched by its competitors, Zynex Co'smarketing team has analysed the impact on Zynex Co's sales performance. Thisdata was retained specifically for the purpose of forecasting future demand of ZynexCo's smartphones and is stored in the company's financial database. Based on thisanalysis, the marketing team has identified three possible outcomes for the impacton the demand of the ZV: a small decrease, a medium decrease and a largedecrease.Production volumes for the ZV need to be adjusted, and based on the potentialchanges in demand, Zynex Co has determined four production volumes. Thefollowing pay-off table has been produced showing the possible profits which can beearned:Production volumes (units)150,000200,000250,000300,000DemandProbability$'000$'000$'000$'000Small0.52,000decrease2,8003,2003,400Medium0.3decrease1,0001,1001,5001,200Largedecrease0.29001,0007006003 Help/Formulae Sheet Elag for ReviewBased on the minimax regret decision rule, which production volume would Zynex Co choose?300,000 units200,000 unitsⒸ250,000 units150,000 units

The Minimax regret approach is a technique in which maximum regrets for each case is ascertained and…

Answered: Based on the minimax regret decision…

Based on the minimax regret decision rule, which production volume would Zynex Co choose? 300,000 units 200,000 units Ⓒ250,000 units 150,000 units

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Zynex Co manufactures a range of electronic devices, which it sells to online stores
and retail outlets. It has a risk-seeking attitude and its objective is to maximise profit.
Six months ago it released a new version of its smartphone, the ZV. Zynex Co's main
smartphone competitor has announced that it will launch a new version of its
smartphone in one month's time and Zynex Co is concerned about the effect of the
launch of this rival product on future demand for the ZV.
For each of the previous ten smartphones launched by its competitors, Zynex Co's
marketing team has analysed the impact on Zynex Co's sales performance. This
data was retained specifically for the purpose of forecasting future demand of Zynex
Co's smartphones and is stored in the company's financial database. Based on this
analysis, the marketing team has identified three possible outcomes for the impact
on the demand of the ZV: a small decrease, a medium decrease and a large
decrease.
Production volumes for the ZV need to be adjusted, and based on the potential
changes in demand, Zynex Co has determined four production volumes. The
following pay-off table has been produced showing the possible profits which can be
earned:
Production volumes (units)
150,000
200,000
250,000
300,000
Demand
Probability
$'000
$'000
$'000
$'000
Small
0.5
2,000
decrease
2,800
3,200
3,400
Medium
0.3
decrease
1,000
1,100
1,500
1,200
Large
decrease
0.2
900
1,000
700
600
3 Help/Formulae Sheet

Elag for Review
Based on the minimax regret decision rule, which production volume would Zynex Co choose?
300,000 units
200,000 units
Ⓒ250,000 units
150,000 units

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