Use this information to answer the following questions.
A plant manager is considering buying additional stamping machines to accommodate increasing demand.The alternatives are to buy 1 machine,2 machines,or 3 machines.The profits realized under each alternative are a function of whether their bid for a recent defense contract is accepted or not.The payoff table below illustrates the profits realized (in $000's)based on the different scenarios faced by the manager.
$$\begin{array} { l c c }
\text { Alternative } & \text { Bid Accepted } & \text { Bid Rejected } \
\hline \text { Buy 1 machine } & \$ 10 & \$ 5 \
\text { Buy 2 machines } & \$ 30 & \$ 4 \
\text { Buy 3 machines } & \$ 40 & \$ 2
\end{array}$$
-Refer to the information above.Assume that ABC Inc.has hired a marketing research firm that provided additional information regarding next year's demand.Suppose that the probabilities of low and high demand are assessed as follows: P(Low)= 0.4 and P(High)= 0.6.
a.Develop a decision tree for this problem.
b.Analyze the decision tree and determine which alternative should be chosen.
c.Using the expected opportunity loss (EOL)criterion,which alternative should be chosen?

Question

Use this information to answer the following questions.
A plant manager is considering buying additional stamping machines to accommodate increasing demand.The alternatives are to buy 1 machine,2 machines,or 3 machines.The profits realized under each alternative are a function of whether their bid for a recent defense contract is accepted or not.The payoff table below illustrates the profits realized (in $000's)based on the different scenarios faced by the manager.
 $$\begin{array} { l c c } 
\text { Alternative } & \text { Bid Accepted } & \text { Bid Rejected } \
\hline \text { Buy 1 machine } & \$ 10 & \$ 5 \
\text { Buy 2 machines } & \$ 30 & \$ 4 \
\text { Buy 3 machines } & \$ 40 & \$ 2
\end{array}$$
-Refer to the information above.Assume that ABC Inc.has hired a marketing research firm that provided additional information regarding next year's demand.Suppose that the probabilities of low and high demand are assessed as follows: P(Low)= 0.4 and P(High)= 0.6.
a.Develop a decision tree for this problem.
b.Analyze the decision tree and determine which alternative should be chosen.
c.Using the expected opportunity loss (EOL)criterion,which alternative should be chosen?

Quizplus · Accepted Answer

The Answer of Use this information to answer the following questions.
A plant manager is considering buying additional stamping machines to accommodate increasing demand.The alternatives are to buy 1 machine,2 machines,or 3 machines.The profits realized under each alternative are a function of whether their bid for a recent defense contract is accepted or not.The payoff table below illustrates the profits realized (in $000's)based on the different scenarios faced by the manager.
 $$\begin{array} { l c c } 
\text { Alternative } & \text { Bid Accepted } & \text { Bid Rejected } \
\hline \text { Buy 1 machine } & \$ 10 & \$ 5 \
\text { Buy 2 machines } & \$ 30 & \$ 4 \
\text { Buy 3 machines } & \$ 40 & \$ 2
\end{array}$$
-Refer to the information above.Assume that ABC Inc.has hired a marketing research firm that provided additional information regarding next year's demand.Suppose that the probabilities of low and high demand are assessed as follows: P(Low)= 0.4 and P(High)= 0.6.
a.Develop a decision tree for this problem.
b.Analyze the decision tree and determine which alternative should be chosen.
c.Using the expected opportunity loss (EOL)criterion,which alternative should be chosen?

Use This Information to Answer the Following Questions -Refer to the Information Above