Concept explainers
a)
To determine: The best choice from the given alternatives using different approaches.
Introduction:
Maximax approach:
Find the best possible payoff for each alternative and choose the alternative that has the “best.”
b)
To determine: The best choice from the given alternatives using different approaches.
Introduction:
Maximin approach:
Find the worst possible payoff for each alternative and choose the alternative that has the “best worst.”
c)
To determine: The best choice from the given alternatives using different approaches.
Introduction:
Laplace:
Determine the average payoff for each alternative and select the alternative with the best average.
d)
To determine: The best choice from the given alternatives using different approaches.
Introduction:
Minimax regret:
Prepare a table of regrets (opportunity losses) for each column, and subtract every payoff from the best payoff in that column. Identify the worst regret for each alternative. Select the alternative with the “best worst.”
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Operations Management
- The new business venture, Best-In-World, has been manufacturing technology devices for over 2020 years and is considering adding a new technology device to its music line. They have an established reputation for building quality devices, but they are rather novice in the music industry. The Chief Innovation and Design Officer, Julie Naugle-Hall, is tasked with hiring a marketing firm to conduct a survey to determine the feasibility and demand for their new music device. The follow decision table illustrates the potential payoffs for a high demand, moderate demand and low demand for the new music device. The decision will be whether to start production on this new device in small scale, large scale or not at all.Decision Table State of Nature Alternatives High Demand Moderate Demand Low Demand Small-scale production 900,000900,000 300,000300,000 −400,000-400,000 Large-scale production 1,700,0001,700,000 700,000700,000 −1,000,000-1,000,000 No production 00 00 00…arrow_forwardThe new business venture, Best-In-World, has been manufacturing technology devices for over 2020 years and is considering adding a new technology device to its music line. They have an established reputation for building quality devices, but they are rather novice in the music industry. The Chief Innovation and Design Officer, Julie Naugle-Hall, is tasked with hiring a marketing firm to conduct a survey to determine the feasibility and demand for their new music device. The follow decision table illustrates the potential payoffs for a high demand, moderate demand and low demand for the new music device. The decision will be whether to start production on this new device in small scale, large scale or not at all.Decision Table State of Nature Alternatives High Demand Moderate Demand Low Demand Small-scale production 1,000,0001,000,000 300,000300,000 −200,000-200,000 Large-scale production 1,600,0001,600,000 700,000700,000 −1,000,000-1,000,000 No production 00 00 00…arrow_forwardSee picture for question details.arrow_forward
- The Ace Steel Mill estimates the demand for steel in millions of tons per year as follows:Millions of Tons Probability10 .1012 .2514 .3016 .2018 .15a. If capacity is set at 18 million tons, how much of a capacity cushion is there?b. What is the probability of idle capacity, and what is the average utilization of the plant at 18 million tons of capacity?c. If it costs $8 million per million tons of lost business and $80 million to build a million tons of capacity, how much capacity should be built to minimize total costs?arrow_forwardA firm is weighing three capacity alternatives: small, medium, and large job shop.Whatever capacity choice is made, the market for the firm’s product can be “moderate”or “strong.” The probability of moderate acceptance is estimated to be 40%; strongacceptance has a probability of 60%. The payoffs are as follows. Small job shop,moderate market = $24,000; Small job shop, strong market = $54,000. Medium job shop,moderate market = $20,000; medium job shop, strong market = $64,000.Large job shop,moderate market = -$2,000; large job shop, strong market = $96,000. Which capacitychoice should the firm make?arrow_forwardPicture attachedarrow_forward
- Emerson Electric is considering the purchase of equipment that will allow the company to manufacture a new line of wireless devices for home appliance control. The first cost will be $80,000 and the life estimated is 6 years with a salvage value of $10,000. Three different salespeople have provided estimates regarding the added revenue the equipment will generate. Salespersons 1,2, and 3 have made estimates of $10,000 , $16,000 , and $18,000 per year respectively if the Companys MARR is 8% per year find the PW of each salespersons estimates.arrow_forwardA 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…arrow_forwardA 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: $3 million. Probability of rezoning: 0.30. 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 1,100 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…arrow_forward
- 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: $3 million. Probability of rezoning: 0.50. 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 1,400 apartments that the tentative plan shows would be possible. If she builds a shopping center, there is a 50 percent chance that she can sell the shopping center to a large department store chain for $6 million over her construction cost, which excludes the land; and there is a 50 percent chance that she can sell it…arrow_forwardc. From the following decision tree, develop a payoff table and calculate: * Maximax, Minimax regret, Maximin, and EMV. ORs. 50,000 Good conditions (0.60) Poor conditions (0.40) -O Rs. 30,000 Apartment Building Good conditions (0.60) O Rs. 100,000 Office building Poor conditions (0.40) Purchase ORs -40,000 Warchouse Good conditions (0.60) Rs.30, 000 Poor conditions (0.40) O Rs. 10,000arrow_forwardThe city of Winnipeg is considering whether to build a new public ice rink. This rink would have a capacity of 800 ice skaters per day, and the proposed admission fee is $6 per individual per day. The estimated cost of the ice rink, averaged over the life of the rink, is $4 per ice skater per day. The city of Winnipeg has hired you to assess this project. Fortunately, Ottawa already has an ice rink, and the city of Ottawa has randomly varied the price of that rink to find how price affects usage. The results from their study follow: Ice rink price Number of ice skaters per day $8 $10 $4 $6 $2 per day 500 200 1100 800 1400 a. If the ice rink is built as planned, what would be the net benefit per day from the ice rink? What is the consumer surplus for ice skaters? b. Given this information, is an 800-ice rink the optimally sized ice rink for Winnipeg to build? Explain.arrow_forward
- Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,