If, in addition to the estimated profits, management of the bank assesses the probabilities of high, medium, and low demands to be 0.3, 0.4, and 0.3 respectively, what is the expected opportunity loss from selecting location of L4?
Answer(s): A
The opportunity loss matrix is as follow:
During the past few gears, Wilder Company has experienced the following average number of power outages:Each power outage results in out-of-pocket costs of U $300. For U $1, 000 per month, At US $800 can lease generator to provide power during outages. If Wilder leases a generator in the coming year, the estimated savings or additional expense) for the year will be
Answer(s): C
Each outage costs US $800, but this experience can be avoided by paying US $1, 000 per month US $12, 000 for the year). The expected-value approach uses the probability distribution derived from past experience to determine the average expected outages per month.The company can expect to have, on average, 1.58334 outages per month. At US $800 per outage, the expected costs is US $1, 266.67. Thus, paying US $1, 000 to avoid an expense of US $1, 266.67 saves US $266.67 per month, or US $3, 200 per year.
Philip enterprises, distributor of compact disks(CDS), is developing its budgeted cost of goods sold for 1998.Philip has developed the following range of sales estimates and associated probabilities for the year:Philip's cost of goods sold averages 80% of sales. t hat is the expected value of Philip's 1998 budgeted cost of goods sold?
Answer(s): D
The expected value is calculated by weighting each sales estimate by the probability of its occurrence. Consequently, the expected value of sales is US $84, 000 [$60, 000 .25) + $85, 000 .40) + $100, 000 .35)]. Cost of goods sold is therefore US $67, 200 800/0 $84, 000).
The expected value of perfect information is the
Perfect information permits certainty that a future state of nature will occur. The expected value of perfect information determines the maximum amount a decision maker is willing to pay for information. It is the difference between the expected value without perfect information, that is, the expected value of the best action under uncertainty and the expected value under certainty. Under certainty, a decision maker knows in each case which state of nature will occur and can act accordingly.
A chief executive officer CEO) believes that a major competitor may be planning a new campaign. The CEO sends a questionnaire to key personnel asking for original thinking concerning what the new campaign may be. The CEO selects the best possibilities then sends another questionnaire asking for the most likely option. The process employed by the CEO is called the
Answer(s): B
The Delphi technique is a forecasting or decision-making approach that attempts to avoid groupthink the tendency of individuals to conform to what they perceive to be the consensus). The technique allows only written, anonymous communication among group members. Each member takes a position on the problem at hand. A summary of these positions is communicated to each member. The process is repeated for several iterations as the members more toward a consensus. Thus, the Delphi technique is a qualitative, not quantitative, technique.The College Honor Society sells hot pretzels at the home football games. The pretzels are sold for US $1.00 each, and the cost per pretzel is U $.30. Any unsold pretzels are discarded because they will be stale before the next home game. 95. The estimated demand for pretzel at the next home football game.
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