Operations Management: Processes and Supply Chains, Student Value Edition Plus MyLab Operations Management with Pearson eText -- Access Card Package (11th Edition)
Operations Management: Processes and Supply Chains, Student Value Edition Plus MyLab Operations Management with Pearson eText -- Access Card Package (11th Edition)
11th Edition
ISBN: 9780134111056
Author: Lee J. Krajewski, Manoj K. Malhotra, Larry P. Ritzman
Publisher: PEARSON
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Chapter A, Problem 20P
Summary Introduction

Interpretation: Decision tree and activity of management to reach the highest expected payoff.

Concept Introduction: Decision tree is a pictorial representation showing attributes of an outcome. It extends from nodes to different branches showing a series of probability.

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Define the goal of decision analysis and how different decision makers may approach risk in their terms of assessment utility.
Leisure Corporation’s decision to produce a new line of recreational products resulted in the need to construct either a small plant or a large plant. The best plant size depends on how the marketplace reacts to the new product line. To conduct an analysis, marketing management has decided to view the possible long-run demand as low, medium, or high. The following payoff table shows the projected profit in millions of dollars: Profits Long-Run Demand   Low Medium High Small Plant 150 200 200 Large Plant 50 200 500   If Leisure Corporation has an extremely pessimistic outlook on demand, would it build a small or a large plant?  If Leisure Corporation wanted to minimize the maximum opportunity losses (regrets), would it build a small or a large plant?
draw the decision tree
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