Ronald Lau, chief engineer at South Dakota Electronics, has to decide whether tobuild a new state-of-the-art processing facility. If the new facility works, thecompany could realize a profit of $200,000. If it fails, South Dakota Electronics couldlose $180,000. At this time, Lau estimates a 60% chance that the new process willfail.The other option is to build a pilot plant and then decide whether to build acomplete facility. The pilot plant would cost $10,000 to build. Lau estimates a 50 -50 chance that the pilot plant will work. If the pilot plant works, there is a 90%probability that the complete plant, if it is built, will also work. If the pilot plant doesnot work, there is only a 20% chance that the complete project (if it is constructed)will work. Lau faces a dilemma. Should he build the plant? Should he build the pilotproject and then make a decision? Help Lau by analyzing this problem. Px

Decision analysis is a part of business operations where the organization has to take a decision…

Answered: Ronald Lau, chief engineer at South…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section: Chapter Questions

Problem 30P

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Scenario 4 Sharon Gillespie, a new buyer at Visionex, Inc., was reviewing quotations for a tooling contract submitted by four suppliers. She was evaluating the quotes based on price, target quality levels, and delivery lead time promises. As she was working, her manager, Dave Cox, entered her office. He asked how everything was progressing and if she needed any help. She mentioned she was reviewing quotations from suppliers for a tooling contract. Dave asked who the interested suppliers were and if she had made a decision. Sharon indicated that one supplier, Apex, appeared to fit exactly the requirements Visionex had specified in the proposal. Dave told her to keep up the good work. Later that day Dave again visited Sharons office. He stated that he had done some research on the suppliers and felt that another supplier, Micron, appeared to have the best track record with Visionex. He pointed out that Sharons first choice was a new supplier to Visionex and there was some risk involved with that choice. Dave indicated that it would please him greatly if she selected Micron for the contract. The next day Sharon was having lunch with another buyer, Mark Smith. She mentioned the conversation with Dave and said she honestly felt that Apex was the best choice. When Mark asked Sharon who Dave preferred, she answered, Micron. At that point Mark rolled his eyes and shook his head. Sharon asked what the body language was all about. Mark replied, Look, I know youre new but you should know this. I heard last week that Daves brother-in-law is a new part owner of Micron. I was wondering how soon it would be before he started steering business to that company. He is not the straightest character. Sharon was shocked. After a few moments, she announced that her original choice was still the best selection. At that point Mark reminded Sharon that she was replacing a terminated buyer who did not go along with one of Daves previous preferred suppliers. Ethical decisions that affect a buyers ethical perspective usually involve the organizational environment, cultural environment, personal environment, and industry environment. Analyze this scenario using these four variables.
Scenario 4 Sharon Gillespie, a new buyer at Visionex, Inc., was reviewing quotations for a tooling contract submitted by four suppliers. She was evaluating the quotes based on price, target quality levels, and delivery lead time promises. As she was working, her manager, Dave Cox, entered her office. He asked how everything was progressing and if she needed any help. She mentioned she was reviewing quotations from suppliers for a tooling contract. Dave asked who the interested suppliers were and if she had made a decision. Sharon indicated that one supplier, Apex, appeared to fit exactly the requirements Visionex had specified in the proposal. Dave told her to keep up the good work. Later that day Dave again visited Sharons office. He stated that he had done some research on the suppliers and felt that another supplier, Micron, appeared to have the best track record with Visionex. He pointed out that Sharons first choice was a new supplier to Visionex and there was some risk involved with that choice. Dave indicated that it would please him greatly if she selected Micron for the contract. The next day Sharon was having lunch with another buyer, Mark Smith. She mentioned the conversation with Dave and said she honestly felt that Apex was the best choice. When Mark asked Sharon who Dave preferred, she answered, Micron. At that point Mark rolled his eyes and shook his head. Sharon asked what the body language was all about. Mark replied, Look, I know youre new but you should know this. I heard last week that Daves brother-in-law is a new part owner of Micron. I was wondering how soon it would be before he started steering business to that company. He is not the straightest character. Sharon was shocked. After a few moments, she announced that her original choice was still the best selection. At that point Mark reminded Sharon that she was replacing a terminated buyer who did not go along with one of Daves previous preferred suppliers. What should Sharon do in this situation?
Given is a decision payoff table and a Sub Decision Payoff Table. Use Minimax Regret as an evaluation criterion to evaluate alternatives. Alternatives Low Future Demand Moderate High Small Facility 52 42 43 Medium Facility 50 49 49 Large Facility -15 38 Alternatives Small Facility Medium Facility Large Facility Worst Regrets ? ? ? a) The worst regrets for alternative Small Facility is Blank 1 b) The worst regrets for alternative Medium Facility is Blank 2 c) The worst regrets for alternative Large Facility is Blank 3 d) The best course of action or decision by using Minimax Regret is to select Blank 4 facility 51
Given is a decision payoff table and a Sub Decision Payoff Table. Use Minimax Regret as an evaluation criterion to evaluate alternatives. Alternatives Low Future Demand Moderate Small Facility 49 48 Medium Facility 46 47 Large Facility -12 112 47 Alternatives Small Facility Medium Facility Large Facility Worst Regrets ? ? ? a) The worst regrets for alternative Small Facility is Blank 1 b) The worst regrets for alternative Medium Facility is Blank 2 c) The worst regrets for alternative Large Facility is Blank 3 d) The best course of action or decision by using Minimax Regret is to select Blank 4 facility 47 ཆེ་ཆེ་བེ་རྡོ High
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1. Kirsten is trying to decide where to go for her well-earned vacation. She would like to camp, but if the weather is bad, she will have to go to a motel. Given the costs and probabilities of bad weather given below, which destination should she choose? Camping cost Motel cost Probability of bad weather Nevada $21.2 $80.9 0.2 Oregon $15.9 $84.6 0.4 California $30 $95 0.1 a. California, because its EMV = $33.14 b. Nevada, because its EMV = $33.14 c. California, because its EMV = $36.5 d. Any of the 3 choices. e. Oregon, because its EMV = $43.38 f. Nevada, because its EMV = $43.38 g. None of the 3 choices. h. Oregon, because its EMV is $36.50.
Decision Tree Analysis
John and Jane Darling are newlyweds trying to decide amongseveral available rentals. Alternatives were scored on a scaleof 1 to 5 (5 = best) against weighted performance criteria,as shown in Table 13.7. The criteria included rent, proximity to work and recreational opportunities, security, and otherneighborhood characteristics associated with the couple’svalues and lifestyle. Alternative A is an apartment, B is abungalow, C is a condo, and D is a downstairs apartment inJane’s parents’ home.Which location is indicated by the preference matrix? Whatqualitative factors might cause this preference to change?
1. A builder has located a piece of property that she would like to buy and eventually build on. The land is currently zoned for four homes per acre, but she is planning to request new zoning. What she builds depends on approval of zoning requests and your analysis of this problem to advise her. With her input and your help, the decision process has been reduced to the following costs, alternatives, and probabilities: Cost of land: $2 million. Probability of rezoning: 0.60. If the land is rezoned, there will be additional costs for new roads, lighting, and so on of $1 million. If the land is rezoned, the contractor must decide whether to build a shopping center or 1,500 apartments that the tentative plan shows would be possible. If she builds a shopping center, there is a 70 percent chance that she can sell the shopping center to a large department store chain for $4 million over her construction cost, which excludes the land; and there is a 30 percent chance that she can sell it to an…
Build New plant option=
The owners of Sweet-Tooth Bakery have determined thatthey need to expand their facility in order to meet their increaseddemand for baked goods. Th e decision is whether to expand nowwith a large facility or expand small with the possibility of havingto expand again in fi ve years.Th e owners have estimated the following chances for demand:• Th e likelihood of demand being high is 0.70.• Th e likelihood of demand being low is 0.30.Profi ts for each alternative have been estimated as follows:• Large expansion has an estimated profi tability of either$80,000 or $50,000, depending on whether demand turnsout to be high or low.• Small expansion has a profi tability of $40,000, assumingdemand is low.• Small expansion with an occurrence of high demand wouldrequire considering whether to expand further. If the bakeryexpands at this point, the profi tability is to be $50,000.(a) Draw a decision tree showing the decisions, chanceevents, and their probabilities, as well as the profi tabilityof…
Given is a decision payoff table. Alternatives Small Facility Medium Facility Large Facility Low 26 18 -7 Future Demand Moderate 21 31 30 High 18 22 42 a) The best decision under uncertainty using MAXIMAX is to select Blank 1 facility b) The best decision under uncertainty using MAXIMIN is to select Blank 2 facility c) The best decision under uncertainty using LAPLACE/EQUALITY LIKELY is to select Blank 3 facility d) If the probabilities for Future Demand when it is Low-0.35, Moderate -0.30, and High-0.35, the expected monetary value (EMV) for the large facility-Blank 4.

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