Exam 14: Decision Making

List and describe decision rules that are used for decision making under uncertainty.

Table A.3 In choosing between three new jobs,Joe MBA considers the potential payoffs over the next three years.The following table contains the payoffs,given the speed of promotion in each of the organizations.The probability of fast promotion is 0.6,and the probability of slow promotion is 0.4. -Use the information in Table A.3 and the Laplace decision rule.The weighted payoff is

A company is screening ideas for new services.Five alternative service ideas are being considered.Management identified four criteria and weighted them as follows: A = 30,B = 10,C = 20,and D = 40.They have also come up with scored values for the five alternatives and the four criteria as shown following.Management has decided that if an alternative has less than a total scored value of 600,it should automatically be rejected.Use the preference matrix technique to determine which idea should be accepted.

What assumptions are made when using break-even analysis?

________ is a technique for systematically changing parameters in a model to determine the effects of such changes.

In order for a decision tree to be a valuable decision tool,the decision-maker should be in a condition of

Sensitivity analysis is a technique for systematically changing parameters in a model to determine the effects of such changes.

A new product will sell in the market for $12.It costs $7 (unit variable cost)to manufacture on a new lathe machine.If the break-even quantity is 10,000 units,what is the annual fixed cost involved in acquiring the machine and in paying other fixed costs?

If probabilities for events can be estimated,then the situation faced by the decision maker is called ________.

A wily marketing director must decide among four alternatives for a new marketing campaign.She ascertains that the probability of high demand is 0.8 and the probability of low demand is 0.2.What is the best choice with the payoffs shown in the tree?

The decision rule in decision making under uncertainty that would be best for the manager who has high expectations would be

Mantel Incorporated began producing its new line of dolls at its Connecticut plant in December of year 0.In year 1,it produced 30,000 dolls at a total cost of $385,000.In year 2,its production increased to 80,000 dolls at a total cost of $885,000.Assuming the cost structure was the same for both years,what must be the variable cost (c)and the fixed cost (F)per doll?

A crafty operations manager has developed this decision tree to evaluate the alternatives for a planned expansion.If the probability of high demand is 0.6,what is the best course of action?

When using decision tree analysis

Choosing the alternative that is the best weighted payoff using decision making under uncertainty would be

Zipco is in serious negotiations to purchase a chunking machine that will enable them to perform their own chunking at $1 per unit.They currently have their chunking outsourced at a cost of $1.50 per unit and a fixed cost of $45,000.Their marketing team feel that they can sustain an annual volume of 10,000 units.What is the maximum fixed cost that Zipco should be willing to bear in order to perform their own chunking?

Making a decision under risk using the expected value criterion is the equivalent of using the Laplace decision rule under uncertainty.

The decision rule in decision making under uncertainty most appropriate for the pessimistic manager would be

Choosing the alternative that minimizes lost-opportunity costs using decision making under uncertainty would be

The Forsite Company is screening three new product ideas.Resource constraints allow only one idea to be commercialized at the present time.The following estimates have been made for the five performance criteria that management feels are most important.If the five criteria are equally weighted,what are the best and worst alternatives?