Practical Management Science, Loose-leaf Version
5th Edition
ISBN: 9781305631540
Author: WINSTON, Wayne L.; Albright, S. Christian
Publisher: Cengage Learning
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Chapter 11, Problem 62P
An automobile manufacturer is considering whether to introduce a new model called the Racer. The profitability of the Racer depends on the following factors:
- The fixed cost of developing the Racer is triangularly distributed with parameters $3, $4, and $5, all in billions.
- Year 1 sales are
normally distributed with mean 200,000 and standard deviation 50,000. Year 2 sales are normally distributed with mean equal to actual year 1 sales and standard deviation 50,000. Year 3 sales are normally distributed with mean equal to actual year 2 sales and standard deviation 50,000. - The selling price in year 1 is $25,000. The year 2 selling price will be 1.05[year 1 price + $50 (% diff1)] where % diff1 is the number of percentage points by which actual year 1 sales differ from expected year 1 sales. The 1.05 factor accounts for inflation. For example, if the year 1 sales figure is 180,000, which is 10 percentage points below the expected year 1 sales, then the year 2 price will be 1.05[25,000 + 50(− 10)] = $25,725. Similarly, the year 3 price will be 1.05[year 2 price + $50(% diff2)] where % diff2 is the percentage by which actual year 2 sales differ from expected year 2 sales.
- The variable cost in year 1 is triangularly distributed with parameters $ 10,000, $ 12,000, and $ 15,000, and it is assumed to increase by 5% each year.
Your goal is to estimate the
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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
65
70
75
80
85
Stock
0.1
0.25
0.2
0.1
0.35
This textbook costs the bookstore $70 and sells for $95 Any unsold copies can be returned to the publisher, less a restocking fee and shipping, for a net refund o $30.
a) Based on the given information, Vaidy's conditional profits table for the bookstore is:
Demand
65
70
75
80
85
Stock
0.1
0.25
0.2
0.1
0.35
65
?
?
?
?
?
The Eagles will play the Falcons on Sunday, September 12, 2021. Suppose the Eagles have a 40% chance of winning the game. Suppose football games cannot end in a tie.
(a) What is the random variable associated with this game?
(b) What is the mutually exclusive event in this case?
(c) Construct a well-labeled probability distribution table based on the outcomes of this game.
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 demnad
high demand
Decision alternative
s1
s2
s3
manufacture d1
-20
40
100
purchase d2
10
45
70
The state-of-nature probabilities are P(s1) = 0.35, P(s2) = 0.35, and P(s3) = 0.30.
a. A test market study of the potential demand for the product is expected to report either a favourable (F) or unfavourable (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
Compute the probabilities by completing the table
Sate of…
Chapter 11 Solutions
Practical Management Science, Loose-leaf Version
Ch. 11.2 - If the number of competitors in Example 11.1...Ch. 11.2 - In Example 11.1, the possible profits vary from...Ch. 11.2 - Referring to Example 11.1, if the average bid for...Ch. 11.2 - See how sensitive the results in Example 11.2 are...Ch. 11.2 - In Example 11.2, the gamma distribution was used...Ch. 11.2 - Prob. 6PCh. 11.2 - In Example 11.3, suppose you want to run five...Ch. 11.2 - In Example 11.3, if a batch fails to pass...Ch. 11.3 - Rerun the new car simulation from Example 11.4,...Ch. 11.3 - Rerun the new car simulation from Example 11.4,...
Ch. 11.3 - In the cash balance model from Example 11.5, the...Ch. 11.3 - Prob. 12PCh. 11.3 - Prob. 13PCh. 11.3 - The simulation output from Example 11.6 indicates...Ch. 11.3 - Prob. 15PCh. 11.3 - Referring to the retirement example in Example...Ch. 11.3 - A European put option allows an investor to sell a...Ch. 11.3 - Prob. 18PCh. 11.3 - Prob. 19PCh. 11.3 - Based on Kelly (1956). You currently have 100....Ch. 11.3 - Amanda has 30 years to save for her retirement. At...Ch. 11.3 - In the financial world, there are many types of...Ch. 11.3 - Suppose you currently have a portfolio of three...Ch. 11.3 - If you own a stock, buying a put option on the...Ch. 11.3 - Prob. 25PCh. 11.3 - Prob. 26PCh. 11.3 - Prob. 27PCh. 11.3 - Prob. 28PCh. 11.4 - Prob. 29PCh. 11.4 - Seas Beginning sells clothing by mail order. An...Ch. 11.4 - Based on Babich (1992). Suppose that each week...Ch. 11.4 - The customer loyalty model in Example 11.9 assumes...Ch. 11.4 - Prob. 33PCh. 11.4 - Suppose that GLC earns a 2000 profit each time a...Ch. 11.4 - Prob. 35PCh. 11.5 - A martingale betting strategy works as follows....Ch. 11.5 - The game of Chuck-a-Luck is played as follows: You...Ch. 11.5 - You have 5 and your opponent has 10. You flip a...Ch. 11.5 - Assume a very good NBA team has a 70% chance of...Ch. 11.5 - Consider the following card game. The player and...Ch. 11.5 - Prob. 42PCh. 11 - Prob. 44PCh. 11 - You now have 10,000, all of which is invested in a...Ch. 11 - Prob. 46PCh. 11 - Prob. 47PCh. 11 - Based on Marcus (1990). The Balboa mutual fund has...Ch. 11 - Prob. 50PCh. 11 - Prob. 52PCh. 11 - The annual demand for Prizdol, a prescription drug...Ch. 11 - Prob. 54PCh. 11 - The DC Cisco office is trying to predict the...Ch. 11 - Prob. 56PCh. 11 - Prob. 58PCh. 11 - You are considering a 10-year investment project....Ch. 11 - Prob. 61PCh. 11 - An automobile manufacturer is considering whether...Ch. 11 - Prob. 63PCh. 11 - Prob. 65PCh. 11 - Rework the previous problem for a case in which...Ch. 11 - Prob. 68PCh. 11 - The Tinkan Company produces one-pound cans for the...Ch. 11 - Prob. 70PCh. 11 - In this version of dice blackjack, you toss a...Ch. 11 - Prob. 76PCh. 11 - It is January 1 of year 0, and Merck is trying to...Ch. 11 - Suppose you are an HR (human resources) manager at...Ch. 11 - You are an avid basketball fan, and you would like...Ch. 11 - Suppose you are a financial analyst and your...Ch. 11 - Software development is an inherently risky and...Ch. 11 - Health care is continually in the news. Can (or...
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