Deck 17: Decision Making

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

Maximax is a decision rule for the pessimist.

Answer 3

False

Question 4

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)F is less than $80,000,and c is greater than $7.
B)F is greater than $60,000,and c is less than $5.
C)F is less than $100,000,and c is greater than $9.
D)F is greater than $110,000,and c is less than $6.

Question 5

Decision theory is a general approach to decision making when the outcomes associated with alternatives are often in doubt.

Question 6

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

Question 7

Which one of the following statements about break-even analysis,as we applied it to evaluating products or services,is best?

A)Break-even analysis assumes that the cost function is linear and consists of fixed costs plus variable costs times volume.
B)The break-even quantity will increase when the change in variable cost per unit is identical to the change in unit price.
C)Increasing the price,while keeping the variable cost per unit constant,increases the break-even quantity.
D)Increasing the fixed costs tends to decrease the break-even quantity.

Question 8

If the payoff table contains expenses instead of revenues,then the optimistic criterion is Minimin.

Question 9

By definition,the maximax and maximin criteria cannot result in the selection of a common alternative in decision making under uncertainty.

Question 10

If a new alternative is added to a payoff table and the maximax criterion is applied again,the new decision must either remain with the original maximax alternative or the new alternative.

Question 11

The square nodes in a decision tree represent the alternatives in a sequential decision situation.

Question 12

The break-even quantity is the volume at which the total revenue equals total cost.

Question 13

A preference matrix is a table that allows the manager to rate an alternative according to one performance criterion.

Question 14

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?

A)less than $35,000
B)between $35,000 and $40,000
C)between $40,001 and $45,000
D)above $45,000

Question 15

A payoff table shows the amount for each alternative if each possible event occurs.

Question 16

If the payoff table contains expenses instead of revenues,then the pessimistic criterion is Minimin.

Question 17

The Laplace criterion will reach the same decision as the Minimax Regret criterion when the payoff table contains expenses instead of revenues.

Question 18

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

A)The break-even quantity will tend to increase as the variable cost per unit of production decreases.
B)As sales increase beyond the break-even quantity,total before-tax profits tend to decrease.
C)A restaurant's opening of downsized facilities with only drive-through service is an example of lowering fixed costs and the break-even quantity.
D)Increasing the unit selling price has the effect of increasing the break-even quantity.

Question 19

The variable cost is the portion of total cost that remains constant regardless of changes in levels of production.

Question 20

Which condition would result in invalidating an application of break-even analysis?

A)The variable cost to produce a unit is less than one percent of the fixed cost to run the plant.
B)The purchasing department both offers quantity discounts to customers and receives quantity discounts from suppliers.
C)The variable cost to produce a unit is within one percent of the sale price.
D)The labor to manufacture the item is free.

Question 21

Use the following to answer the questions below.
A company must decide if it will make or buy an item it needs.The company can make the item for $10 per unit,but must invest $15,000 in tooling to do so.An outside firm has quoted a total price of $12 per unit to supply the quantity required (assume their fixed costs are included in the quoted price).
Refer to the instruction above.What is the break-even quantity in this situation?

A)6,500 units
B)7,000 units
C)7,250 units
D)7,500 units

Question 22

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.What is the slope of the fixed-cost line for production in San Francisco?

A)$2,500,000
B)$25
C)$20
D)0

Question 23

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?

A)less than $40,000
B)greater than $40,000 but less than or equal to $55,000
C)greater than $55,000 but less than or equal to $70,000
D)greater than $70,000

Question 24

Use the following to answer the questions below.
A company must decide if it will make or buy an item it needs.The company can make the item for $10 per unit,but must invest $15,000 in tooling to do so.An outside firm has quoted a total price of $12 per unit to supply the quantity required (assume their fixed costs are included in the quoted price).
Refer to the instruction above.Which alternative should be selected if annual requirements are 5,000 units?

A)Make
B)Buy
C)Either Make or Buy;costs are the same for either option at 5,000 units
D)Can't be determined with information given

Question 25

A new product is being considered that will require $45,000 in fixed costs per year.Variable costs per unit are estimated to be $12.72.The firm wants to break even if 8000 units are produced and sold per year.What should be the price?

A)less than $16.00
B)between $16.00 and $16.99
C)between $17.00 and $17.99
D)between $18.00 and $18.99

Question 26

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?

A)$0.40
B)$5.40
C)$10.40
D)$15.40

Question 27

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.If executives decide to produce at the San Francisco plant but are nervous about sales numbers,which model would provide the greatest profit at the lowest sales volumes?

A)regular
B)large
C)jumbo
D)It doesn't matter because the fixed costs are the same for the same site.

Question 28

Demron is in serious negotiations to purchase a welding machine that will enable them to perform their own welding.They currently have their welding outsourced at a cost of $1.50 per weld and a fixed cost of $45,000.Their marketing team feels that they can sustain an annual sales volume sufficient to require 35,000 welds.If a fancy new welding rig costs $13,500 what is the maximum variable cost per weld that Demron should be willing to pay in order to bring this process in-house?

A)$3.00 per weld
B)$2.40 per weld
C)$2.00 per weld
D)$1.45 per weld

Question 29

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?

A)$50,000
B)$45,000
C)$40,000
D)$35,000

Question 30

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.How much does Luvmatics make for each Jumbo unit that is produced in Tuttle and sold at the listed price?

A)$68
B)$58
C)$34
D)This cannot be determined without any information on the production volume.

Question 31

Minor Video has opened a new store renting videocassettes.Fixed costs are $60,000,and the variable cost per unit is $1.50.The average sale is $5 per customer.Use the following axes to determine the break-even quantity graphically.Next,refine your solution by solving it algebraically.(Show your work for credit. )

A)The break-even quantity is fewer than or equal to 10,000 rentals.
B)The break-even quantity is more than 10,000 rentals and fewer than or equal to 20,000 rentals.
C)The break-even quantity is more than 20,000 rentals and fewer than or equal to 25,000 rentals.
D)The break-even quantity is more than 25,000 rentals.

Question 32

Use the following to answer the questions below.
A company must decide if it will make or buy an item it needs.The company can make the item for $10 per unit,but must invest $15,000 in tooling to do so.An outside firm has quoted a total price of $12 per unit to supply the quantity required (assume their fixed costs are included in the quoted price).
Refer to the instruction above.What does the company save for the year by selecting this low-cost option (for annual requirements of 5,000 units)?

A)$15,000
B)$60,000
C)$65,000
D)$5,000

Question 33

Use the following to answer the questions below.
A company is considering two suppliers for the purchase of a part needed for manufacturing.Particulars are as follows:

Refer to the instruction above.For an annual volume of 3,000 units,which supplier should be chosen?

A)Supplier A
B)Supplier B
C)Either Supplier A or Supplier B,because costs are the same for either option at 3,000 units
D)Can't be determined with information given

Question 34

A new product that will sell for $75.00 has variable costs of $38.00 per unit.Fixed costs of $75,000 must be incurred every year to manufacture this product.What is the annual volume to break even?

A)fewer than 1500 units.
B)1500 to 1749 units.
C)1750 to 1999 units.
D)2000 units or more.

Question 35

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.What is the difference in break-even points for the Large model between Tuttle and San Francisco?

A)fewer than 25,000 units
B)between 25,000 units and 40,000 units
C)between 40,000 units and 55,000 units
D)more than 55,000 units

Question 36

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.How many units of the Regular size must be sold each year to break even if production is at the San Francisco plant?

A)fewer than 30,000 units
B)more than 30,000 units but fewer than 80,000 units
C)more than 80,000 units but fewer than 130,000 units
D)more than 130,000 units

Question 37

A poultry farmer is debating whether to acquire Rhode Island Reds or Buff Orpingtons to lay the eggs he wants to sell.The fixed costs for the Buffs would be $7500 and the variable costs per egg would be a dime per egg.The Reds would have a fixed cost of $6000 and a variable cost of fifteen cents.At what level of egg production would the poultry farmer be indifferent between Rhode Island Reds and Buff Orpingtons?

A)20,000 eggs
B)30,000 eggs
C)50,000 eggs
D)60,000 eggs

Question 38

Use the following to answer the questions below.
A company is considering two suppliers for the purchase of a part needed for manufacturing.Particulars are as follows:

Refer to the instruction above.What is the annual break-even quantity for choosing between the two suppliers?

A)1,000 units
B)2,000 units
C)6,000 units
D)12,000 units

Question 39

Commodore is debating whether to produce the printed circuit boards for a new line of video cameras or outsource their production to a company that specializes in this operation.Strictly from a cost standpoint,production of the circuit boards would definitely be outsourced if:

A)the variable cost of producing the circuit boards is lower than the buy option.
B)the production volumes are greater than Commodore's break-even quantity.
C)the production volumes are less than Commodore's break-even quantity.
D)the production volumes are the same for making and buying the circuit boards.

Question 40

A software company that sells its software pre-installed in personal computers is considering making its own computers instead of purchasing them from the Mega-Chip Company.To assemble their own computers could cost $1,000,000 in fixed costs and $100 per unit in variable costs.The company currently buys PCs for $1200,with no fixed costs.What is the break-even quantity?

A)greater than or equal to 1800
B)greater than 900 but fewer than 1800
C)greater than 450 but fewer than 900
D)less than 450

Question 41

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.

A)service #1 or #2
B)service #3 or #4
C)service #5
D)none

Question 42

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 is the break-even quantity?

A)2,000 units per year
B)3,000 units per year
C)6,000 units per year
D)20,000 units per year

Question 43

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?

A)A is best,and B is worst.
B)B is best,and C is worst.
C)B is best,and A is worst.
D)C is best,and A is worst.

Question 44

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

A)maximin.
B)maximax.
C)Laplace.
D)minimax regret.

Question 45

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?

A)2,000 units
B)3,000 units
C)6,000 units
D)20,000 units

Question 46

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 selling price would be necessary to generate an annual profit of $90,000,if expected volume is 6,000 units per year (assume fixed costs remain at $60,000,and variable cost per unit at $35)?

A)$30 / unit
B)$40 / unit
C)$50 / unit
D)$60 / unit

Question 47

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?

A)$400,000
B)$500,000
C)$800,000
D)$850,000

Question 48

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 maximin?

A)A
B)B
C)C
D)D

Question 49

The decision rule most appropriate for the realistic manager using decision making under uncertainty would be:

A)maximin.
B)maximax.
C)Laplace.
D)minimax regret.

Question 50

Choosing the alternative that is the "best of the worst" using decision making under uncertainty would be:

A)maximin.
B)maximax.
C)Laplace.
D)minimax regret.

Question 51

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).

Refer to the instruction above.What is the break even quantity between buying and making?

A)30,000 units per year
B)40,000 units per year
C)50,000 units per year
D)60,000 units per year

Question 52

Use the following to answer the questions below.
A company is considering two suppliers for the purchase of a part needed for manufacturing.Particulars are as follows:

Refer to the instruction above.What does the company save for the year by selecting this low-cost option (for annual requirements of 3,000 units)?

A)$1,000
B)$3,000
C)$6,000
D)$5,000

Question 53

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).

Refer to the instruction above.For what range of output would you prefer to buy?

A)0 - 30,000 units per year
B)30,000 or more units per year
C)40,000 or more units per year
D)0 - 40,000 units per year

Question 54

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).

Refer to the instruction above.For what range of output would you prefer to make?

A)30,000 or more units per year
B)0 - 30,000 units per year
C)0 - 40,000 units per year
D)40,000 or more units per year

Question 55

California Manufacturing,Inc.is now evaluating two new product ideas,and management has decided to apply the preference matrix method.The following table shows five criteria with different weights and individual scores of each product idea.If management has established a threshold of 800,which product(s)should be accepted for further development?

A)product A
B)product B
C)Both products A and B
D)Neither product A nor B

Question 56

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).

Refer to the instruction above.What does the company save for the year by selecting the low-cost option (for annual requirements of 40,000 units)?

A)$150,000
B)$300,000
C)$50,000
D)$40,000

Question 57

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).

Refer to the instruction above.What are total costs to make a quantity of 40,000 units per year?

A)$400,000
B)$450,000
C)$800,000
D)$850,000

Question 58

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

A)maximin.
B)maximax.
C)Laplace.
D)minimax regret.

Question 59

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

A)maximin.
B)maximax.
C)Laplace.
D)minimax regret.

Question 60

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

A)maximin.
B)maximax.
C)Laplace.
D)minimax regret.

Question 61

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 pessimistic outlook?

A)A
B)B
C)C
D)D

Question 62

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?

A)Alternative A
B)Alternative B
C)Alternative C
D)Alternative D

Question 63

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 Laplace?

A)A
B)B
C)C
D)D

Question 64

A marketing director must decide among four alternatives for a new marketing campaign.She ascertains that the probability of high demand is 0.45 and the probability of low demand is 0.55.What is the best choice with the payoffs shown in the tree?

A)Alternative A
B)Alternative B
C)Alternative C
D)Alternative D

Question 65

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 minimax regret?

A)A
B)B
C)C
D)D

Question 66

When using decision tree analysis:

A)the sum of the expected payoffs must always equal zero.
B)round nodes represent decision points.
C)there must be more square nodes than round nodes.
D)probabilities for all branches leaving a chance node must sum to 1.0.

Question 67

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 an optimistic outlook?

A)A
B)B
C)C
D)D

Question 68

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 expected-value rule.Which statement is TRUE?

A)The expected value of the consultant job is more than $300,000.
B)The expected value of the utility analyst job is more than $300,000.
C)The expected value of the research assistant job is less than $250,000.
D)The job with the highest expected value is the research assistant.

Question 69

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 minimax regret?

A)A
B)B
C)C
D)D

Question 70

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.Which alternative is best,given the matrix payoff?

A)The A alternative would be chosen using the maximin decision rule.
B)The B alternative would be chosen using the maximax decision rule.
C)The C alternative would be chosen using the Laplace decision rule.
D)The C alternative would be chosen using the maximin decision rule.

Question 71

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

A)certainty.
B)risk.
C)uncertainty.
D)equilibrium.

Question 72

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?

A)A
B)B
C)C
D)D

Question 73

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 minimax regret decision rule.The maximum regret is:

A)less than $300,000 if the high-flying consultant job is selected.
B)less than $300,000 if the utility analyst job is selected.
C)less than $300,000 if the research assistant job is selected.
D)lowest for the research assistant job.

Question 74

George Burdell must decide among four alternatives for an oil exploration project.He estimates that the probability of high demand is 0.3 and the probability of low demand is 0.7.What is the best choice with the payoffs shown in the tree?

A)Alternative A
B)Alternative B
C)Alternative C
D)Alternative D

Question 75

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 if further study revealed that the probability of high growth is 0.2,the probability of medium growth is 0.5,and the probability of low growth is 0.3?

A)A
B)B
C)C
D)D

Question 76

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:

A)less than $200,000 if the high-flying consultant job is selected.
B)more than $280,000 if the research assistant job is selected.
C)more than $280,000 if the utility analyst job is selected.
D)highest for the research assistant position.

Question 77

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 if further study revealed that the probability of high growth is 0.2,the probability of medium growth is 0.5,and the probability of low growth is 0.3?

A)A
B)B
C)C
D)D

Question 78

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?

A)A
B)B
C)C
D)D

Question 79

Analyze the following decision tree.Determine the missing probabilities,and identify the alternative that maximizes the expected payoff.

A)Option 1,with an expected payoff of less than $25
B)Option 1,with an expected payoff of $25 or more
C)Option 2,with an expected payoff of less than $25
D)Option 2,with an expected payoff of $25 or more

Question 80

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)Alternative A
B)Alternative B
C)Alternative C
D)Alternative D