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to recommend a decision. sion: Purchase component ne whether Gorman should attempt to obtain a better estimate of demand. ] of the potential demand for the product is expected to report either a favorable (F) or unfavorable (U) condition. The P(U | S1) = 0.90

to recommend a decision. sion: Purchase component ne whether Gorman should attempt to obtain a better estimate of demand. ] of the potential demand for the product is expected to report either a favorable (F) or unfavorable (U) condition. The P(U | S1) = 0.90

Practical Management Science
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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с Grand Canyon University | Privat X Student Portal | Main Topic 1 - Decision Analysis - Homew Problem 4-25 eBook EVPI: $ Decision Alternative Manufacture, di Purchase, de https://v2.cengagenow.com/ilm/takeAssignment/takeAssignmentMain.do?invoker&takeAssignmentSessionLocator=&inprogress=false P(F)- State of Nature Low Demand Medium Demand High Demand 51 -20 10 X 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): 52 40 45 BUS-660 Topic 1 DQ 1 53 100 70 The state-of-nature probabilities are P(S1) 0.35, P(S2) 0.35, and P(s) - 0.30. a. Use a decision tree to recommend a decision. Recommended decision: Purchase component b. Use EVPI to determine whether Gorman should attempt to obtain a better estimate of demand. d. What is Gorman's optimal decision strategy? Decision strategy: X CengageNOWv2 | Online teachin x MindTap-Cengage Learning 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(FI $2) 0.40 P(U I s1) 0.90 P(US2) 0.60 P(F| $3)-0.60 P(UI $3) 0.40 What is the probability that the market research report will be favorable? If required, round your answer to three decimal places. x + A e 3 00 1 G 12 Next >
Transcribed Image Text:с Grand Canyon University | Privat X Student Portal | Main Topic 1 - Decision Analysis - Homew Problem 4-25 eBook EVPI: $ Decision Alternative Manufacture, di Purchase, de https://v2.cengagenow.com/ilm/takeAssignment/takeAssignmentMain.do?invoker&takeAssignmentSessionLocator=&inprogress=false P(F)- State of Nature Low Demand Medium Demand High Demand 51 -20 10 X 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): 52 40 45 BUS-660 Topic 1 DQ 1 53 100 70 The state-of-nature probabilities are P(S1) 0.35, P(S2) 0.35, and P(s) - 0.30. a. Use a decision tree to recommend a decision. Recommended decision: Purchase component b. Use EVPI to determine whether Gorman should attempt to obtain a better estimate of demand. d. What is Gorman's optimal decision strategy? Decision strategy: X CengageNOWv2 | Online teachin x MindTap-Cengage Learning 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(FI $2) 0.40 P(U I s1) 0.90 P(US2) 0.60 P(F| $3)-0.60 P(UI $3) 0.40 What is the probability that the market research report will be favorable? If required, round your answer to three decimal places. x + A e 3 00 1 G 12 Next >
irchase, 02 The state-of-nature probabilities are P(S1) = 0.35, P(S2) = 0.35, and P(S3) = 0.30. a. Use a decision tree to recommend a decision. Recommended decision: Purchase component b. Use EVPI to determine whether Gorman should attempt to obtain a better estimate of demand. EVPI: $ 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 probabilitie P(F | S1) = 0.10 P(FS₂) 0.40 P(U| S₁)= 0.90 P(U | $₂) = 0.60 P(F|53) = 0.60 P(U| S3)0.40 What is the probability that the market research report will be favorable? If required, round your answer to three decimal places. P(F) = d. What is Gorman's optimal decision strategy? Decision strategy: If F then 70 If U then e. What is the expected value of the market research information? Expected value: $ f. What is the efficiency of the information? If required, round your answer to one decimal place. Efficiency: %
Transcribed Image Text:irchase, 02 The state-of-nature probabilities are P(S1) = 0.35, P(S2) = 0.35, and P(S3) = 0.30. a. Use a decision tree to recommend a decision. Recommended decision: Purchase component b. Use EVPI to determine whether Gorman should attempt to obtain a better estimate of demand. EVPI: $ 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 probabilitie P(F | S1) = 0.10 P(FS₂) 0.40 P(U| S₁)= 0.90 P(U | $₂) = 0.60 P(F|53) = 0.60 P(U| S3)0.40 What is the probability that the market research report will be favorable? If required, round your answer to three decimal places. P(F) = d. What is Gorman's optimal decision strategy? Decision strategy: If F then 70 If U then e. What is the expected value of the market research information? Expected value: $ f. What is the efficiency of the information? If required, round your answer to one decimal place. Efficiency: %
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