A manager is quite concerned about the recent deterioration of a section of the roof on a building that houses her firm's computer operations. According to her assistant, there are three options which merit consideration: A, B, and C. Moreover, there are three possible future conditions that must be included in the analysis: I, which has a probability of occurrence of .5; II, which has a probability of .3; and III, which has a probability of .2. If condition I materializes, A will cost USD 12,000, B will cost USD 20,000, and C will cost USD 16,000. If condition II materializes, the costs will be USD 15,000 for A, USD 18,000 for B, and USD 14,000 for C. If condition III materializes, the costs will be USD 10,000 for A, USD 15,000 for B, and USD 19,000 for C. _____ alternative will yield the most profit _____ is the profit for the said alternative

A manager is quite concerned about the recent deterioration of a section of the roof on a building that houses her firm's computer operations. According to her assistant, there are three options which merit consideration: A, B, and C. Moreover, there are three possible future conditions that must be included in the analysis: I, which has a probability of occurrence of .5; II, which has a probability of .3; and III, which has a probability of .2. If condition I materializes, A will cost USD 12,000, B will cost USD 20,000, and C will cost USD 16,000. If condition II materializes, the costs will be USD 15,000 for A, USD 18,000 for B, and USD 14,000 for C. If condition III materializes, the costs will be USD 10,000 for A, USD 15,000 for B, and USD 19,000 for C. _ alternative will yield the most profit _ is the profit for the said alternative

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter10: Introduction To Simulation Modeling

Section: Chapter Questions

Problem 41P: At the beginning of each week, a machine is in one of four conditions: 1 = excellent; 2 = good; 3 =...

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At the beginning of each week, a machine is in one of four conditions: 1 = excellent; 2 = good; 3 = average; 4 = bad. The weekly revenue earned by a machine in state 1, 2, 3, or 4 is 100, 90, 50, or 10, respectively. After observing the condition of the machine at the beginning of the week, the company has the option, for a cost of 200, of instantaneously replacing the machine with an excellent machine. The quality of the machine deteriorates over time, as shown in the file P10 41.xlsx. Four maintenance policies are under consideration: Policy 1: Never replace a machine. Policy 2: Immediately replace a bad machine. Policy 3: Immediately replace a bad or average machine. Policy 4: Immediately replace a bad, average, or good machine. Simulate each of these policies for 50 weeks (using at least 250 iterations each) to determine the policy that maximizes expected weekly profit. Assume that the machine at the beginning of week 1 is excellent.
A manager is quite concerned about the recent deterioration of a section of the roof on a building that houses her firm’s computer operations. According to her assistant there are three options which merit consideration: A, B, and C. Moreover, there are three possible future conditions that must be included in the analysis: I, which has a probability of occurrence of .5; II, which has a probability of .3; and III, which has a probability of .2. If condition I materializes, A will cost $1500, B will cost $2000, and C will cost $1600. If condition II materializes, the costs will be $1500 for A, $1800 for B, and $1900 for C. If condition III materializes, the costs will be $1000 for A, $1600 for B, and $1900 for C. (A) Draw a decision tree for this problem. (B) Using expected monetary value, which alternative should be chosen
A manager is quite concerned about the recent deterioration of a section of the roof on a building that houses her firm's computer operations. According to her assistant there are three options which merit consideration: I, II, and III. Moreover, there are three possible future conditions that must be included in the analysis: A, which has a probability of occurrence of .3; B, which has a probability of .5; and C, which has a probability of .2.If condition A materializes, I will cost $12,000, II will cost $20,000, and III will cost $16,000. If condition B materializes, the costs will be $15,000 for I, $18,000 for II, and $14,000 for III. If condition C materializes, the costs will be $10,000 for I, $15,000 for II, and $19,000 for III.(A) Draw a decision tree for this problem.(B) Using expected monetary value, which alternative should be chosen?
Your manager is quite concerned about the recent deterioration of a section of the roof on a building that houses your firm's computer operations. According to your assistant there are three options which merit consideration: A, B, and C. Moreover, there are three possible future conditions that must be included in the analysis: I, which has a probability of occurrence of .5; II, which has a probability of .3; and III, which has a probability of .2. If condition I materializes, A will cost $12,000, B will cost $20,000, and C will cost $16,000. If condition II materializes, the costs will be $15,000 for A, $18,000 for B, and $14,000 for C. If condition III materializes, the costs will be $10,000 for A, $15,000 for B, and $19,000 for C. (A) Draw a decision tree for this problem (B) Using expected monetary value, which alternative should be chosen? Explain your Answer.
A manager is quite concerned about the recent deterioration of a section of the roof on a building that houses her firm’s computer operations. According to her assistant there are three options which merit consideration: I, II, and III. Moreover, there are three possible future conditions that must be included in the analysis: A, which has a probability of occurrence of .25; B, which has a probability of .6; and C, which has a probability of .15. If condition A materializes, I will cost $12000, II will cost $20000, and III will cost $16000. If condition B materializes, the costs will be $15000 for I, $18000 for II, and $14000 for III. If condition C materializes, the costs will be $10000 for I, $15000 for I, and $19000 for III. (A) Draw a decision tree for this problem. (B) Using expected monetary value, which alternative should be chosen
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Ralph Dodd, a concessionaire for the local ballpark, has developed a table of conditional values for the various alternatives (stocking decision) and states of nature (size of the crowd). LARGE AVERAGE SMALL PROBABILITY .3 .5 .2 ALTERNATIVE 1 9,000 12,000 -2,000 ALTERNATIVE 2 22,000 6,000 6,000 ALTERNATIVE 3 15,000 12,000 5,000 The probabilities associated with the states of nature are 0.30 for a large crowd, 0.50 for an average crowd, and 0.20 for a small crowd. a) The opportunity cost for choosing Alternative 2 in the presence of a large crowd is: b) The minimum expected opportunity loss is: c) The maximum amount of money that Ralph should be willing to pay for the perfect information is:
A firm must decide whether to construct a small, medium, or large stamping plant. A consultant’sreport indicates a .20 probability that demand will be low and an .80 probability that demand willbe high.If the firm builds a small facility and demand turns out to be low, the net present value will be$42 million. If demand turns out to be high, the firm can either subcontract and realize the net present value of $42 million or expand greatly for a net present value of $48 million.The firm could build a medium-size facility as a hedge: If demand turns out to be low, its netpresent value is estimated at $22 million; if demand turns out to be high, the firm could do nothingand realize a net present value of $46 million, or it could expand and realize a net present value of$50 million.If the firm builds a large facility and demand is low, the net present value will be – $20 million,whereas high demand will result in a net present value of $72 million.a. Analyze this problem using a decision…
11. Bakery Products is considering the introduction of a new line of pastries. In order to produce the new line, the bakery is considering either a major or a minor renovation of its current plant. Bill Wicker, head of operations, has developed the following conditional values table: Alternatives Favorable Market Unfavorable Market Major renovation $100,000 -$90,000Minor renovation $40,000 -$20,000 Do nothing $0 $0 Assume that the probability of a favorable market is equal to the probability of an unfavorable market.Part 2a) Choose the appropriate decision tree showing payoffs and probabilities.A.MinorFavorable40,000Unfavorable-20,000UnfavorableFavorableMajor100,000-90,000Do…
1. Procter, president of a food company, must decide whether to market a new breakfast drink which the R and D division has developed. A special meeting devoted to this topic yields the following information: ● The marketing vice-president has defined two possible outcomes for the success of this product; either the public will accept the product, or it will not. She believes that the product will be accepted with probability 0.1. The cost engineers believe that if the product is marketed and accepted, the company will net $100,000 yearly. If the product is rejected, however, the company will suffer a net loss of $20,000 yearly. If Procter decides not to market the product, her company will neither accrue more cost nor make any profit on this product. ● Procter always makes decisions based on the expected value of the outcomes. A. What is the best strategy in this case? B. Compute for EVPI.
a. Mayers & Smith Corp. has a fertilizer plant. The probability of an explosion at the plant depends on how much the firm spends on safety as given by the table below. If an explosion occurs, the loss to society (damaged equipment, death of employees, etc.) is expected to be $250 million. Safety Expenditure $ millions) 0.0 0.5 1.0 1.5 2.0 2.5 Probability of Loss 0.030 0.020 0.016 0.013 0.011 0.010 Find the optimal level of safety from a societal perspective. marginal cost and marginal benefit; optimal amount. Suppose Mayers & Smith has to pay only one half of the losses that occur. How much would Mayers & Smith spend on safety?
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