The estimated demand for pretzels at the next home football game using an expected value approach is
Answer(s): B
The calculation using an expected value approach weights each possible sales volume by its probability. Thus, the estimated demand is 4, 400 pretzels.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. The frequency distribution of the demand for pretzels pe game is presented as follows.
The estimated demand for pretzels at the next home football game using a deterministic approach based on the most likely outcome is
Answer(s): C
A deterministic approach assumes that a value is known with certainty. If that value is deemed to be the most likely outcome, assumed demand will be 5, 000 pretzels, the volume with the highest probability 35%). A beverage stand can sell either soft drinks or coffee on any given day. If the stand sells soft drinks and the weather i= hot, it will make US $2, 600; if the weather is cold, the profit will be US $1, 000. If the stand sells coffee and the weather is hot, it will make US $1, 900: if the weather is cold, the profit will be US $2, 000. The probability of cold weather on a given day at this time is 60°l%.
The expected payoff if the vendor has perfect information is
The vendor would like to sell coffee on cold days US $2, 000) and soft drinks on hot days US $2, 500). Hot days are expected 40°l0 of the time. Hence, the probability is 40°f0 of making US $2, 500 by selling soft drinks. The chance of making US $2, 000 by selling coffee is 600k. The payoff equation is:.4 US $2, 600) + .6 $2, 000 = US $2, 200A beverage stand can sell either soft drinks or coffee on any given day. If the stand sells soft drinks and the weather is hot, it will make US $2, 500; if the weather is cold, the profit will be U $1, 000. If the stand sells coffee and the weather is hot, it will make US $1, 900; if the weather is cold, the profit will be U $2, 000. The probability of cold weather on a given day at this time is 60%.
If the probability of hot weather, given a hot weather forecast, is 50%, how much would the vendor be willing to pay for the forecast?
If the weather is hot and coffee is served, the vendor earns US $1, 900. If the vendor knows the weather will be hot, s)he would sell soft drinks and make U $2, 500, a US $600 increase. Thus, the vendor should be willing to pay up to U $600 for perfect information regarding hot weather. However, if the forecasts are only 50% accurate, the information is not perfect. Accordingly, the vendor should be willing to pay only U $300 the U $600 potential increase in profits 50%) for the sometimes accurate forecasts.
An audit manager has just returned from an executive training program and has suggested that the audit department develop a mathematical model to help identify factors that may be causing changes in the cost of production. According to the manager, the model should recognize that the company currently has three separate production cost) ': enters. l 'hich of the following approaches would best provide the analysis suggested by the audit manager?
Regression analysis extends correlation to find an equation for the linear relationship among variables. The behavior of a dependent variable, such as cost of production, is explained in terms of one or more independent variables far example, raw material costs, employees, overtime). Thus, multiple regression analysis determines functional relationships among quantitative variables.
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