Compute the expected monetary value (EMV) for all alternatives. Analyse which alternatives is the best decision criterion.
Contingency Table
A contingency table can be defined as the visual representation of the relationship between two or more categorical variables that can be evaluated and registered. It is a categorical version of the scatterplot, which is used to investigate the linear relationship between two variables. A contingency table is indeed a type of frequency distribution table that displays two variables at the same time.
Binomial Distribution
Binomial is an algebraic expression of the sum or the difference of two terms. Before knowing about binomial distribution, we must know about the binomial theorem.
Pak Zailan Bed and Breakfast, in a small historic Melaka town, must decide how to subdivide (remodel) the large old home that will become its inn. There are three alternatives: Option A would modernized all baths and combine rooms, leaving the inn with four suites, each suitbale for two to four adults. Option B would modernized only the second floor; the results would be six suites, four for two to four adults, two for two adults only. Option C (the status quo option) leaves all wall intact. In this case, there are eight rooms available, but only two are suitable for four adults, and four rooms will not have private baths. The details of profit and demand patterns that will shows each option are:
Table 1: Profit and
[Jadual 1: Maklumat keuntungan dan kebarangkalian setiap alternatif.]
|
Annual Profit Under Various Demand Patterns [Keuntungan tahunan dibawah pelbagai permintaan] |
||||
|
Alternatives [Alternatif] |
High [Tinggi] |
Probability [Kebarangkalian] |
Average [Sederhana] |
Probability [Kebarangkalian] |
|
A (modernized all) |
RM100,000 |
0.5 |
RM35,000 |
0.5 |
|
B (modernized 2nd) |
RM90,000 |
0.4 |
RM80,000 |
0.6 |
|
C (status quo) |
RM70,000 |
0.3 |
RM65,000 |
0.7 |
- Compute the
expected monetary value (EMV) for all alternatives. - Analyse which alternatives is the best decision criterion.
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