**Question 10**A vendor for the local ballpark food stand is evaluating whether to stock his concession with a large or small inventory. His decision is influenced by the anticipated size of the crowd. To assist with this decision, he has created a payoff matrix for different alternatives (stocking decisions) and states of nature (crowd sizes). The problem requires using the criterion of realism (Hurwicz) with an alpha of 0.7. **Payoff Matrix:**| Alternatives | Large Crowd | Average Crowd | Small Crowd ||---------------------|-------------|---------------|-------------|| **Large Inventory** | $220,000 | $50,000 | -$2,000 || **Small Inventory** | $90,000 | $70,000 | -$5,000 |**Probability:**- Large Crowd: 0.20- Average Crowd: 0.50- Small Crowd: 0.30**Options:**- A) $61,500- B) $130,000- C) $64,600- D) $23,500- E) $153,400The matrix illustrates potential profits or losses based on the combination of inventory decisions and crowd sizes. The criterion of realism (Hurwicz) combines the optimism and pessimism of decision-making by using the alpha value to balance the best and worst outcomes.

Mathematic models of decision-making help businesses make the correct decisions for their…

Answered: (Using the same problem) A vendor for…

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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Consider the requirement that shopping malls need a license to remain open 24 hours, where these licenses are in fixed supply. These licenses are however freely tradable among actual and potential owners, and the industry is perfectly competitive. If the average 24-hour shopping mall’s annual revenue is $250,000, while the licenses may be leased at an annual fee of $100,000. Given this information, average variable cost for the industry would be $100,000. Is the preceding statement true or false?
A shop is planning an order for a popular Christmas festive season product. Demand for the product usually starts from first week of December till first week of January and reduces sharply thereafter. For this reason, and to stimulate sales for leftovers, the product is sold at a significantly reduced price from the second week of January to the fourth week of January. Any leftover after the fourth week of January goes waste. The table below gives past data on total demand for the period from first week of December to first week of January, and from second week of January to fourth week of January, together with their respective chances of occurrence. The product can be purchased at a wholesale price of GHS60 per unit for a pack containing 600 products, GHS57 per unit for a pack containing 800 products, and GHS52 per unit for a pack containing 1000 products. The shop plans to sell the product for GHS80 per unit from first week of December to first week of January, and at a reduced…
3
The University of Miami bookstore stocks textbooks in preparation for sales each semester. It normally relies on departmental forecasts and preregistration records to determine how many copies of a text are needed. Preregistration shows 85 operations management students enrolled, but bookstore manager Vaidy Jayaraman has second thoughts, based on his intuition and some historical evidence. Vaidy believes that the distribution of sales may range from 65 to 85 units, according to the following probability model: Demand Probability 65 0.10 Stock 70 0.30 65 This textbook costs the bookstore $82 and sells for $112. Any unsold copies can be returned to the publisher, less a restocking fee and shipping, for a net refund of $30. a) Based on the given information, Vaidy's conditional profits table for the bookstore is: 65 p=0.10 75 0.20 70 p=0.30 80 0.10 Demand 75 p=0.20 80 p = 0.10 85 p=0.30 85 0.30
A Company currently has 230 units of a product on-hand that it orders every three weeks when the salesperson visits the premises. Average demand for the product is 20 units per day with a standard deviation of 5 units. Lead time for the product to arrive is seven days. Management has a goal of 95 percent probability of not stocking out for this product. The salesperson is due to come in late this afternoon when 210 units are left in stock. How many units should be ordered?
5ñ
Taylor Smith owns a small clothing company, Cuteness for You, that offers an online subscription and personal shopping service targeted at busy families with children aged newborn to five years old. Currently, Taylor has one level of subscription service, the standard service. For $100 a month, the standard service provides its customers a monthly delivery of 10 clothing items carefully chosen to match the child's size, gender, and emerging style. The online clothing subscription market is fairly new but is growing rapidly and thus Taylor is considering extending the product line to increase its market share and profits. Taylor is debating whether to add a premium subscription service featuring profitable high-markup items for $125 per month, a basic subscription service that contains lower-markup popular items priced at $75 per month, or possibly both. Taylor knows that the new product lines provide an opportunity to attract more customers and possibly increase revenues and profit,…

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