Trey Leeman,Operations Manager at National Consumers,Inc.(NCI),is evaluating alternatives for increasing capacity at NCI's Fountain Hill plant. He has identified four alternatives,and has constructed the following payoff table which shows payoffs (in $1,000,000's)for the three possible levels of market demand. If Trey uses the maximax criterion,the appropriate alternative would be: _____________.
A) Lease New Equipment
B) Purchase New Equipment
C) Add Third Shift
D) Do Nothing
E) Do everything

Question

Trey Leeman,Operations Manager at National Consumers,Inc.(NCI),is evaluating alternatives for increasing capacity at NCI's Fountain Hill plant. He has identified four alternatives,and has constructed the following payoff table which shows payoffs (in $1,000,000's)for the three possible levels of market demand.  If Trey uses the maximax criterion,the appropriate alternative would be: _____________.
A) Lease New Equipment 
B) Purchase New Equipment 
C) Add Third Shift 
D) Do Nothing 
E) Do everything

Quizplus · Accepted Answer

The maximax criterion is a decision-making rule that selects the alternative that maximizes the maximum possible payoff. Looking at the table, we can see that Alternative B (Purchase New Equipment) has the highest payoff for each demand level. Therefore, Trey should choose Alternative B as it provides the highest potential payoff.