Chapter 9, Problem 30P

a)

Summary Introduction

To identify: The decision that would minimize the expected cost using precision tree.

Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

Explanation of Solution

Formulae to determine the above table:

b)

Summary Introduction

To determine: The input that have the largest effect on the best.

Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

Explanation of Solution

Formulae to determine the above table:

Decision tree developed by precision tree software:

Decision tree should be developed using precision tree software.

Place the cursor at any blank cell and click decision tree under precision tree icon. The following window will appear:

Press ok and the below image (Model image) will appear:

Click in the triangle:

Select decision (The below image is model):

Click ok and the below image (Model image) will appear:

Click in the triangle:

Select chance (The below image is model):

The process should be continued till end.

The following image shows the complete decision tree:

According to decision tree, it is better to wait and purchase the sugar in six months.

Strategy B4:

Strategy B5:

Strategy B6:

The sensitivity analysis was done for the cells B4, B5, and B6. It is optimal to purchase a 10-ton futures contract.