Answered: If Leisure Corporation has an extremely…

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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Question

Leisure Corporation’s decision to produce a new line of recreational products resulted in the need to construct either a small plant or a large plant. The best plant size depends on how the marketplace reacts to the new product line. To conduct an analysis, marketing management has decided to view the possible long-run demand as low, medium, or high. The following payoff table shows the projected profit in millions of dollars:

Profits	Long-Run Demand
	Low	Medium	High
Small Plant	150	200	200
Large Plant	50	200	500

If Leisure Corporation has an extremely pessimistic outlook on demand, would it build a small or a large plant?
If Leisure Corporation wanted to minimize the maximum opportunity losses (regrets), would it build a small or a large plant?

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