Edwards Machine Tools needs to purchase a new machine. The basic model is slower but costs less, whereas the advanced model is faster but costs more. Profitability will depend on future demand. The following table presents an estimate of profits over the next three years. S Low Decision Basic model Advanced model $60,000 $45,000 Fill in the table below for maximum and minimum profit payoffs under each model. Round your answers to the nearest dollar. Minimum Maximum Opportunity Loss Matrix Decision alternative Basic model Advanced model Decision alternative Basic model Advanced model Calculate the amounts foregone by not adopting the optimal course of action for each possible demand level. Determine the maximum opportunity cost for each model. Fill in the table below. If your answer is zero, enter "0". Round your answers to the nearest dollar. Low Future events Medium Demand Volume High Medium Maximum High $130,000 $205,000 $90,000 $110,000 Given the uncertainty associated with the demand volume, and no other information to work with, what decision would you make? The aggressive strategy (maximax) is to choose the -Select- The conservative strategy (maximin) is to choose the -Select- The opportunity loss strategy is to choose the -Select-
Edwards Machine Tools needs to purchase a new machine. The basic model is slower but costs less, whereas the advanced model is faster but costs more. Profitability will depend on future demand. The following table presents an estimate of profits over the next three years. S Low Decision Basic model Advanced model $60,000 $45,000 Fill in the table below for maximum and minimum profit payoffs under each model. Round your answers to the nearest dollar. Minimum Maximum Opportunity Loss Matrix Decision alternative Basic model Advanced model Decision alternative Basic model Advanced model Calculate the amounts foregone by not adopting the optimal course of action for each possible demand level. Determine the maximum opportunity cost for each model. Fill in the table below. If your answer is zero, enter "0". Round your answers to the nearest dollar. Low Future events Medium Demand Volume High Medium Maximum High $130,000 $205,000 $90,000 $110,000 Given the uncertainty associated with the demand volume, and no other information to work with, what decision would you make? The aggressive strategy (maximax) is to choose the -Select- The conservative strategy (maximin) is to choose the -Select- The opportunity loss strategy is to choose the -Select-
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Am. 344.
Transcribed Image Text:Edwards Machine Tools needs to purchase a new machine. The basic model is slower but costs less, whereas the advanced model is faster but costs more. Profitability will depend on
future demand. The following table presents an estimate of profits over the next three years.
Maximum
Opportunity Loss Matrix
Decision alternative
Basic model
Advanced model
Decision
Basic model
Advanced model
Low
$60,000
$45,000
Fill in the table below for maximum and minimum profit payoffs under each model. Round your answers to the nearest dollar.
Low
$
Minimum
Decision alternative
Basic model
S
Advanced model
$
Calculate the amounts foregone by not adopting the optimal course of action for each possible demand level. Determine the maximum opportunity cost for each model. Fill in the table
below. If your answer is zero, enter "0". Round your answers to the nearest dollar
Future events
Medium
Demand Volume
High
Medium
Maximum
High
$130,000
$205,000
$90,000
$110,000
$
$
Given the uncertainty associated with the demand volume, and no other information to work with, what decision would you make?
The aggressive strategy (maximax) is to choose the -Select-
The conservative strategy (maximin) is to choose the -Select-
The opportunity loss strategy is to choose the -Select-
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