Operations and Supply Chain Management 9th edition
9th Edition
ISBN: 9781119320975
Author: Roberta S. Russell, Bernard W. Taylor III
Publisher: WILEY
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 1.S, Problem 30P
Summary Introduction
To draw: The best decision using expected value.
Introduction: Decision analysis provides the best possible outcome with the use of expected value approach. A decision maker who determines the optimal solutions which is a maximum amount and calculated with the correspondence probability of occurrence of each economic condition.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Mickey Lawson is considering investing some money that he inherited.
The following payoff table gives the profit that would be realized during the next year for each of three investments alternatives Mickey is considering:
State of Nature
Decision alternatives Good Economy Poor Economy
Stock market 80,000 -20,000
Bonds 30,000 20,000
CDs 23,000 23,000
Probability 0.5 0.5
Compute decision would maximize expected profits.
Compute the maximum amount that should be paid for a perfect forecast of the economy.
The following is a payoff table giving profits for various situations.
Alternatives
Alternative 1
Alternative 2
Alternative 3
Do Nothing
130
166
36
States of Nature
A
160
200
120
0
B C
The probabilities for states of nature A, B, and C are 0.3, 0.5, and 0.2,
respectively. If a perfect forecast of the future were available, what is the
expected value with this perfect information?
100 120
100
140
0
180
50
120
0
help me answer this question pls
Chapter 1 Solutions
Operations and Supply Chain Management 9th edition
Ch. 1.S - Prob. 1PCh. 1.S - Prob. 2PCh. 1.S - Prob. 3PCh. 1.S - Prob. 4PCh. 1.S - Prob. 5PCh. 1.S - In Problem S1-5 assume that Nicole, with the help...Ch. 1.S - Prob. 7PCh. 1.S - Prob. 8PCh. 1.S - Telecomp, a computer manufacturer with a global...Ch. 1.S - Prob. 10P
Ch. 1.S - Prob. 11PCh. 1.S - Prob. 12PCh. 1.S - Prob. 13PCh. 1.S - Prob. 14PCh. 1.S - Prob. 15PCh. 1.S - Prob. 16PCh. 1.S - Prob. 17PCh. 1.S - Prob. 18PCh. 1.S - In Problem S1-18, assume the Weight Club is able...Ch. 1.S - Prob. 20PCh. 1.S - Prob. 21PCh. 1.S - Prob. 22PCh. 1.S - Prob. 23PCh. 1.S - Prob. 24PCh. 1.S - Prob. 25PCh. 1.S - Prob. 26PCh. 1.S - Prob. 27PCh. 1.S - Prob. 28PCh. 1.S - Prob. 29PCh. 1.S - Prob. 30PCh. 1.S - Prob. 31PCh. 1.S - Prob. 33PCh. 1.S - Prob. 34PCh. 1.S - Alex Mason has a wide-curving, uphill driveway...Ch. 1.S - Prob. 36PCh. 1.S - Prob. 39PCh. 1.S - Prob. 40PCh. 1.S - State University has three healthcare plans for...Ch. 1.S - The Orchard Wine Company purchases grapes from one...Ch. 1.S - Prob. 43PCh. 1.S - Prob. 1.1CPCh. 1.S - Prob. 2.1CPCh. 1.S - Evaluating Projects at Nexcom Systems Nexcom...Ch. 1 - Feeding America Each year, the Feeding America...Ch. 1 - Feeding America Each year, the Feeding America...Ch. 1 - Feeding America Each year, the Feeding America...Ch. 1 - Feeding America Each year, the Feeding America...Ch. 1 - Prob. 1QCh. 1 - What constitutes operations at (a) a bank, (b) a...Ch. 1 - Prob. 3QCh. 1 - Prob. 4QCh. 1 - Prob. 5QCh. 1 - Prob. 17QCh. 1 - What is the difference between an order winner and...Ch. 1 - Prob. 21QCh. 1 - Prob. 22QCh. 1 - Prob. 23QCh. 1 - Prob. 24QCh. 1 - Prob. 1PCh. 1 - Prob. 2PCh. 1 - Prob. 3PCh. 1 - Prob. 4PCh. 1 - Prob. 5PCh. 1 - Omar Industries maintains production facilities in...Ch. 1 - Rushing yardage for three Heisman Trophy...Ch. 1 - Carpet City recorded the following data on carpet...Ch. 1 - Prob. 9PCh. 1 - Prob. 10PCh. 1 - Prob. 11PCh. 1 - Prob. 12PCh. 1 - Prob. 13PCh. 1 - Prob. 14PCh. 1 - Prob. 15PCh. 1 - Prob. 1.1CPCh. 1 - Prob. 1.2CPCh. 1 - Prob. 1.3CPCh. 1 - Prob. 1.4CPCh. 1 - Prob. 1.5CPCh. 1 - Prob. 2.1CPCh. 1 - Prob. 2.2CP
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.Similar questions
- A soft drink company is considering launching a ‘seasonal soda’ that will be sold for a limited duration. They are considering selling the new soda X-Mist during the upcoming summer season. The company believes, based on its limited market analysis, that there is a 0.75 probability that X-Mist will have a successful summer season and have estimated that they will receive a profit of $4 million if it is successful. If X-Mist is not successful over the summer season, the company will incur a loss of $900,000. The firm Market-Strategies can do an extensive market analysis for a fee of $35,000. Market-Strategies has demonstrated that it is 90 percent reliable in its market analysis for soft drinks, i.e., a soda that will be successful in the market will be reported as ‘Successful’ by Market-Strategies with a probability 0.9 and a soda that will not be successful in the market will be reported as ‘Fail’ by Market-Strategies with a probability of 0.9. The soft drink company must decide…arrow_forwardThe following payoff table provides profits based on various possible decision alternatives adn various levels of demand at Robert Klassan's print shop: decision low high alt 1 $10,000 $36,000 alt 2 $6,000 $38,000 alt 3 -$2500 $52,000 The probability of low demand is 0.40 whereas the probability of high demand is 0.60. a) The alternative that provides Robert the greatest expected monetary value is _________ The EMV for this decision is $_______ b) The expected value with perfect information (EVwPI)= $______ c) The expected value of perfect information (EVPI) for Robert= $________arrow_forwardCool Beans is a locally owned coffeeshop that competes with two large coffee chains, PlanetEuro and Frothies. Alicia, the owner, is considering two different marketing promotions and thinks that CLV analysis will help her decide the best course of action. An average specialty coffee drink sells for $4.26 and has a margin of 83%. One promotion is providing loyalty cards to her regular customers that would give them one free specialty coffee drink after 10 regular purchases. Alicia estimates that this will increase the frequency of their purchases by 14%. Currently, her customers average buying 2 specialty drinks per week. The second promotion is targeted at new customers. She would offer a free specialty drink to incoming college freshmen by providing a coupon with their orientation packages. Because of her location near the college, she expects that 310 students will come to Cool Beans for a free trial. Of those, she anticipates that 16% will become regular customers who will…arrow_forward
- Data collected on the yearly registration for a Six Sigma seminar at the Quality College are shown in the following table: Year Registrations (000) 1 4 2 6 3 4 4 5 5 10 6 8 7 7 8 9 9 12 10 14 11 15 Develop a 4-year moving average to forecast registrations from year 5 to year 12. Estimate demand again for years 5 to 12 within a 4-year weighted moving average in which registrations in the most recent year are given a weight of 3 and 2, and registrations in the other 2 years are each given a weight of 1. Compute the forecasts for each year using exponential smoothing, with an initial forecast for year 5 of 8. Use α = 0.3. Using MAD, which of the three forecasting methods is best? Using MAPE, which of the three forecasting methods is best? Forecast registrations for year 15, using trend projection.arrow_forwardCool Beans is a locally owned coffeeshop that competes with two large coffee chains, PlanetEuro and Frothies. Alicia, the owner, is considering two different marketing promotions and thinks that CLV analysis will help her decide the best course of action. An average specialty coffee drink sells for $3.23 and has a margin of 73%. One promotion is providing loyalty cards to her regular customers that would give them one free specialty coffee drink after 10 regular purchases. Alicia estimates that this will increase the frequency of their purchases by 9%. Currently, her customers average buying 2 specialty drinks per week. The second promotion is targeted at new customers. She would offer a free specialty drink to incoming college freshmen by providing a coupon with their orientation packages. Because of her location near the college, she expects that 330 students will come to Cool Beans for a free trial. Of those, she anticipates that 17% will become regular customers who will purchase…arrow_forwardSunny Groves is a citrus grower in a southern state that has several citrus orchards. Weather forecasters are predicting a significant drop in temperatures over the next two days. The forecast calls for a 25% chance of near-freezing temperatures and a 10% chance of a deep freeze. The management of Sunny Groves is concerned that the impending bad weather may damage their crop of citrus fruit. If the weather is fine, the company stands to make 1,000,000 revenue for their harvest. There are three options that the company can take in light of the coming weather: 1. Do nothing and hope for the best. If the orchards experience near-freezing temperatures, the company will lose half of its crop (and half the revenue). A deep freeze would destroy all of the fruit (and lead to no revenue). Obviously, taking no precautions costs nothing. 2. Take moderate precautions. This involves having many workers placing heaters and warming tents about the orchards. This would cost $50,000 and reduce the…arrow_forward
- A manager is trying to decide whether to build a small, medium, or large facility. Demand can be low, average, or high, with the estimated probabilities being 0.40, 0.35, and 0.25, respectively. A small facility is expected to earn an after-tax net present value of just $13,000 if demand is low. If demand is average, the small facility is expected to earn $15,000; it can be increased to medium size to earn a net present value of $30,000. If demand is high, the small facility is expected to earn $25,000 and can be expanded to medium size to earn $50,000 or to large size to earn $100,000. A medium-sized facility is expected to lose an estimated $50,000 if demand is low and earn $100,000 if demand is average. If demand is high, the medium-sized facility is expected to earn a net present value of $125,000; it can be expanded to a large size for a net payoff of $175,000. If a large facility is built and demand is high, earnings are expected to be $180,000. If demand is average for the large…arrow_forwardFollowing is the payoff table for the Pittsburgh Development Corporation (PDC) Condominium Project. Amounts are in millions of dollars. State of Nature Decision Alternative Strong Demand S1 Weak Demand S2 Small complex, d1 8 7 Medium complex, d2 14 5 Large complex, d3 20 -9 Suppose PDC is optimistic about the potential for the luxury high-rise condominium complex and that this optimism leads to an initial subjective probability assessment of 0.8 that demand will be strong (S1) and a corresponding probability of 0.2 that demand will be weak (S2). Assume the decision alternative to build the large condominium complex was found to be optimal using the expected value approach. Also, a sensitivity analysis was conducted for the payoffs associated with this decision alternative. It was found that the large complex remained optimal as long as the payoff for the strong demand was greater than or equal to $17.5 million and as long as the payoff for…arrow_forwardAs you can see in the following table, demand for heart transplant surgery at Washington General Hospital has increased steadily in the past few years: Year 1 2 3 4 5 Heart Transplants 48.0 50.0 52.0 57.0 58.0 The director of medical services predicted 6 years ago that demand in year 1 would be 44.0 surgeries. a) Using exponential smoothing with α of 0.60 and the given forecast for year 1, the forecasts for years 2 through 6 are (round your responses to one decimal place): Year 1 2 3 4 5 6 Forecast 44.0 nothing nothing nothingarrow_forward
- The unemployment rates (in %) of Merrill County from January through July are: 6.8,7.6,8.5,9.5,9.4,7.4, and 8.2. The unemployment rate forecast for the month of August using the 4-month moving average method is..arrow_forwardThe construction manager for Acme Construction, Inc., must decide whether to build single-family homes, apartments, or condominiums. He estimates annual profits (in $000) will vary with the population trend as follows: Type POPULATION TREND Declining Stable Growing Single Family 200 90 70 Apartments 70 170 90 Condos (20 ) 100 220 If he feels the chances of declining, stable, and growing population trends are 40 percent, 50 percent, and 10 percent, respectively, what is his expected value of perfect information?arrow_forwardA small airplane company called Just-in-Time flies between cities in Florida. It is trying to decide whether to add one extra plane to its fleet next year. Passenger demand that last four quarters are as follows: Q1 = 4,403, Q2 = 4,008, Q3 = 3,750, and Q4 = 4,508 passengers. The forecast for passengers in the second quarter was 4,223 passengers. 1) What is the forecast for the fifth quarter using exponential smoothing with = 0.1? 2) Given only what you learned in a, should the airline add another plane?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,
Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage Learning
Practical Management Science
Operations Management
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:Cengage,
Purchasing and Supply Chain Management
Operations Management
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Cengage Learning