Operations Management: Sustainability and Supply Chain Management (12th Edition)
12th Edition
ISBN: 9780134130422
Author: Jay Heizer, Barry Render, Chuck Munson
Publisher: PEARSON
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Question
Chapter A, Problem 3P
a)
Summary Introduction
To determine: The greatest expected monetary value.
Expected monetary value (EMV) is expected value or payout that has different possible state of nature, each with their associated possibilities.
b)
Summary Introduction
To determine: The expected value of perfect information (EVPI)
Introduction: The maximum value willing to pay in order to gain for information. In EVPI we determine the amount which is willing to pay for the perfect information is said to be EVPI.
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3. A toy manufacturer makes stuffed kittens and puppies which have relatively lifelike motions. There are three
different mechanisms that can be installed in these "pets." These toys will sell for the same price regardless of
the mechanism installed, but each mechanism has its own variable cost and setup cost. Profit, therefore, is
dependent upon the choice of mechanism and upon the level of demand. The manufacturer has in hand a
forecast of demand that suggests a 0.2 probability of light demand, a 0.45 probability of moderate demand,
and a probability of 0.35 of heavy demand. Payoffs for each mechanism-demand combination appear in the
table below.
Wind-up action
Pneumatic action
Electronic action
Demand
Light
Moderate
$250,000
$90,000
-$100,000
400,000
440,000
400,000
Heavy
650,000
740,000
780,000
Construct the appropriate decision tree to analyze this problem. Use standard symbols for the tree.
Analyze the tree to select the optimal decision for the manufacturer.
Payoff Table
Decision Alternatives
Demand
Low
Medium
High
Small, d1
400
500
600
Medium, d2
100
600
800
Large, d3
-300
400
1200
1). If nothing is known about the demand probabilities, what are the recommended decision using the Maximax
(optimistic), Maximin (pessimistic) and Equally Likely?
2). If P(low) = 0.20, P(medium) = 0.35, and P(high) = 0.45. What is the recommended decision using the expected monetary value approach?
3). What is the expected value of perfect information (EVPI)?
Hurwicz criteria
Chapter A Solutions
Operations Management: Sustainability and Supply Chain Management (12th Edition)
Ch. A - Prob. 1DQCh. A - Prob. 2DQCh. A - Prob. 3DQCh. A - Prob. 4DQCh. A - Prob. 5DQCh. A - Question: 6. Explain how decision trees might be...Ch. A - Prob. 7DQCh. A - Prob. 8DQCh. A - Question 9. Identify the five steps in analyzing a...Ch. A - Prob. 10DQ
Ch. A - Question 11. The expected value criterion is...Ch. A - Question 12. When are decision trees most useful?Ch. A - Given the following conditional value table,...Ch. A - Prob. 2PCh. A - Prob. 3PCh. A - Jeffrey Helm owns a health and fitness center...Ch. A - Prob. 5PCh. A - Prob. 6PCh. A - Prob. 7PCh. A - Prob. 8PCh. A - Prob. 9PCh. A - Prob. 10PCh. A - The University of Miami bookstore stocks textbooks...Ch. A - Palmer Jam Company is a small manufacturer of...Ch. A - Prob. 13PCh. A - Prob. 14PCh. A - Prob. 21PCh. A - Prob. 22PCh. A - Prob. 23PCh. A - Prob. 24PCh. A - Prob. 25PCh. A - Prob. 26PCh. A - Philip Musa can build either a large video rental...Ch. A - Prob. 28PCh. A - Prob. 29PCh. A - Question A.24 On the opening page of Module A and...Ch. A - Question Warehouse Tenting at the Port of Miami...Ch. A - Question Warehouse Tenting at the Port of Miami...Ch. A - Question Warehouse Tenting at the Port of Miami...
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