Concept explainers
Build-Rite Construction has received favorable publicity from guest appearances on a public TV home improvement program. Public TV programming decisions seem to be unpredictable, so Build-Rite cannot estimate the probability of continued benefits from its relationship with the show. Demand for home improvements next year may be either low or high. But Build-Rite must decide now whether to hire more employees, do nothing, or develop subcontracts with other home improvement contractors. Build-Rite has developed the following payoff table:
Which alternative is best, according to each of the following decision criteria?
- Maximin
- Maximax
- Laplace
- Minimax regret
Want to see the full answer?
Check out a sample textbook solutionChapter A Solutions
Operations Management: Processes and Supply Chains, Student Value Edition Plus MyLab Operations Management with Pearson eText -- Access Card Package (11th Edition)
- Build-Rite Construction has received favorable publicity from guest appearances on a public TV home improvement program. Public TV programming decisions seem to be unpredictable, so Build-Rite cannot estimate the probability of continued benefits from its relationship with the show. Demand for home improvements next year may be either low or high. But Build-Rite must decide now whether to hire more employees, do nothing, or develop subcontracts with other home improvement contractors. Build-Rite has developed the following payoff table:arrow_forwardBuild-Rite Construction has received favorable publicity from guest appearances on a public TV home improvement program. Public TV programming decisions seem to be unpredictable, so Build-Rite cannot estimate the probability of continued benefits from its relationship with the show. Demand for home improvements next year may be either low or high. But Build-Rite must decide now whether to hire more employees, do nothing, or develop subcontracts with other home improvement contractors. Build-Rite has developed the following payoff table:arrow_forwardBuild-Rite Construction has received favorable publicity from guest appearances on a public TV home improvement program. Public TV programming decisions seem to be unpredictable, so Build-Rite cannot estimate the probability of continued benefits from its relationship with the show. Demand for home improvements next year may be either low or high. But Build-Rite must decide now whether to hire more employees, do nothing, or develop subcontracts with other home improvement contractors. Build-Rite has developed the following payoff table: Alternative Hire Subcontract Do nothing DEMAND FOR HOME IMPROVEMENTS Low Moderate High ($139,000) $183,000 $448,000 $85,000 $158,000 $587,000 $100,000 $143,000 $411,000 Show Transcribed Text Which alternative is best, according to each of the following decision criteria? a. Maximin b. Maximax c. Laplace d. Minimax Regretarrow_forward
- ysis ... Help Save & Exit Submit A decision maker has prepared the following payoff table. States of Nature Alternative High Low Buy 85 -5 Rent 75 40 Lease 45 45 Using the Maximin criterion, what is the best decision and the expected payoff? Best decision Payoff < Prev 5 of 5 Nexlearrow_forwardA decision maker has prepared the following payoff table. States of Nature Alternative High Low Buy 85 5 Rent 70 45 Lease 45 55 Using the Maximax criterion, what is the best decision and the expected payoff?arrow_forwardA company must decide now which of three products to make next year to plan and order proper materials. The cost per unit of producing each product will be determined by whether a new union labor contract passes or fails. The cost per unit for each product, given each contract result, is shown in the following payoff table: Contract Outcome Product Pass Fail 1 $7.50 $6.00 2 4.00 7.00 3 6.50 3.00 Determine which product should be produced, using the following decision criteria. a. Minimin b. Minimaxarrow_forward
- Rare Agri-Products Ltd. is considering a new project with a projectedlife of seven (7) years. The project falls under the government’ssubsidy program for encouraging local agricultural products and iseligible for a one-time rebate of 25% on any initial equipmentinstalled for the project. The initial equipment (IE) will cost$41,000,000. At the end of year 1, An additional equipment (AE) costing$3,500,000 will be needed at the end of year 3. At the end of seven(7) years, the original equipment, IE, will have no resale value butthe supplementary equipment, AE, can be sold for $50,000. A workingcapital of $1,350,000 will be needed.The project is forecast to generate sales of agri-products over theseven years as follows:Year 1 70,000 unitsYear 2 100,000 unitsYears 3-5 250,000 unitsYears 6-7 325,000 unitsA sale price of $150 per unit for the first two years is expected andthen decline to $90 per unit thereafter as the newness of the productloses some sheen. The variable expenses will amount…arrow_forwardAnswer please with correct optionarrow_forward3arrow_forward
- what is the expected payoff $____arrow_forward20. The Video Game Supply Company (VGS) is deciding whether to set next year's production at 2000, 2500, or 3000 games. Demand could be low, medium, or high. Using historical data, VGS estimates the probabilities as: 0.4 for low demand, 0.3 for medium demand, and 0.3 for high demand. The following profit payoff table (in $100s) has been developed. Demand Production Target Low Medium High 2000 games 2500 games 3000 games 1000 1200 1400 800 1500 1300 600 1700 1400 (a) [1] What is the maximax decision alternative? (b) [1] What is the maximin decision alternative? (c) [2] Determine the expected value of each alternative and indicate what should be the production target for next year based on expected value. (d) [1] Determine the expected value with perfect information about the states of nature. (e) [1] Determine the expected value of perfect information.arrow_forwardA decision maker has prepared the following payoff table. States of Nature Alternative High Low Buy 90 10 Rent 60 35 Lease 50 40 Using the Maximax criterion, what is the best decision and the expected payoff? Best decision Payoff 3 of 5arrow_forward
- 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