a. Use a decision tree to recommend a decision.b. Use EVPI to determine whether Gorman should attempt to obtain a better estimate of demand.c. A test market study of the potential demand for the product is expected to report either a favorable (F) or unfavorable (U) condition. The relevant conditional probabilities are as follows:P(F | s1) = 0.10 P(U | s1) = 0.90P(F | s2) = 0.40 P(U | s2) = 0.60P(F | s3) = 0.60 P(U | s3) = 0.40What is the probability that the market research report will be favorable? The Gorman Manufacturing Company must decide whether to manufacture a component part at itsMilan, Michigan, plant or purchase the component part from a supplier. The resulting profit isdependent upon the demand for the product. The following payoff table shows the projected profit (inthousands of dollars):State of NatureLow Demand Medium Demand High DemandDecision AlternativeS2S3S1-2040100Manufacture, dı104570Purchase, d2The state-of-nature probabilities are P(s1) = 0.35 , P(82) = 0.35 , and P(s3) = 0.30 .

A] Use a decision tree to recommend a decision. Expected Value=∑(profit× profit's prpbability)…

Answered: market research report will be…

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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a. Use a decision tree to recommend a decision.

b. Use EVPI to determine whether Gorman should attempt to obtain a better estimate of demand.

c. A test market study of the potential demand for the product is expected to report either a favorable (F) or unfavorable (U) condition. The relevant conditional probabilities are as follows:

P(F | s1) = 0.10 P(U | s1) = 0.90

P(F | s2) = 0.40 P(U | s2) = 0.60

P(F | s3) = 0.60 P(U | s3) = 0.40

What is the probability that the market research report will be favorable?

The Gorman Manufacturing Company must decide whether to manufacture a component part at its
Milan, Michigan, plant or purchase the component part from a supplier. The resulting profit is
dependent upon the demand for the product. The following payoff table shows the projected profit (in
thousands of dollars):
State of Nature
Low Demand Medium Demand High Demand
Decision Alternative
S2
S3
S1
-20
40
100
Manufacture, dı
10
45
70
Purchase, d2
The state-of-nature probabilities are P(s1) = 0.35 , P(82) = 0.35 , and P(s3) = 0.30 .

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