Exam 17: Decision Making

An 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?

A 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?

Use the following to answer the questions below. 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. Table A.4 -Use the information in Table A.4 and the Laplace decision rule.The weighted payoff is:

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 feels 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?

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

Use the following to answer the questions below. A company that is introducing a new product has to choose between four different manufacturing methods,referred to as methods A,B,C and D.Depending on the demand for the product,they have forecast different levels of expenses for the year (values are in thousands).The company has identified three possible states of nature for economic growth,and named them High,Medium,and Low. Table A.3 -Using the information in Table A.3,which alternative is best in accordance with a decision criterion of Laplace?

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

________ is the portion of total cost that remains constant regardless of changes in levels of output.

The break-even quantity for a certain kitchen appliance is 6000 units.The selling price is $10 per unit,and the variable cost is $4 per unit.What must be the fixed cost to break even at 6000 units?

Use the following to answer the questions below. A company that is introducing a new product has to choose between three different manufacturing methods,referred to as methods A,B,and C.Depending on the demand for the product,they have forecast different levels of revenue for the year (values are in thousands).The company has identified three possible states of nature for economic growth,and named them High,Medium,and Low. Table A.2 -Using the information in Table A.2,which alternative is best in accordance with a decision criterion of maximax?

The site selection team you formed last quarter meets with you in the conference room to present the results of their thoughtful analysis.They have collectively logged 200,000 frequent flyer miles while conducting their investigation.The conference room table sags under the weight of their massive report and all team members sport deep tans.As the leader drones on about their completely objective approach to the problem he projects a slide containing the following information about their location of choice. What questions do you,a conscientious vice-president level executive,have for the team about this portion of their analysis?

Use the following to answer the questions below. Luvmatics plans to produce a new product.Three different models are planned: the Regular,Large,and Jumbo.The fixed costs depend on which of two locations are used;in San Francisco the fixed costs would be $2.5 million per year,but in Tuttle the fixed costs would be $1.2 million.Sale prices and variable costs for the three models are shown in the table. Table A.1 -Use the information in Table A.1.Assume the fixed costs and sales price in both locations are constants and the variable costs in San Francisco are as shown in the table.By how much would the variable cost in Tuttle have to rise to give both locations an identical break-even point for the Regular model?

The decision rule ________ chooses the alternative that is the "best of the best."

A chance event that has an impact on the outcome of the choice but is not under the manager's control is called a(n)________.

Use the following information to answer the questions below. You currently make a part for old equipment at a cost of $20 / unit.The annual fixed cost for this equipment is $50,000.You have found an outside supplier who will make the part for $15 / unit if you will pay their annual fixed costs of $200,000 / year (see table). -Refers to the instruction above.What are total costs to buy an annual quantity of 40,000 units?

What assumptions are made when using break-even analysis?

The ________ is the volume at which total revenues equal total costs.

Which one of the following statements about break-even analysis for evaluating products or services is true?

Use the following to answer the questions below. A proposal for implementing a new product line has an annual fixed cost of $60,000,variable cost of $35 per unit of output,and revenue (selling price)of $55 per unit of output. -Refer to the instruction above.What volume of output will be necessary for an annual profit of $60,000?

Provide an example of two or more events where you as a decision maker would truly be engaged in decision making under uncertainty.Why are you incapable of deciding which event is more likely than the other(s)?