18. (Rappaport, 1967) A manufacturer has used linear programming to determine the optimum production mix of the
Question:
18. (Rappaport, 1967) A manufacturer has used linear programming to determine the optimum production mix of the variousTV models it produces. Recent information received by the manufacturer indicates that there is a 40% chance that the supplier of a component used in one of the models may raise the price by $35. The manufacturer thus can take one of two actions: Continue to use the original (optimum) product mix (AI), or use a new (optimum) mix based on the higher component price (A2). Action At is ideal if the price is not raised and action A2 will also be ideal if the price is raised. The following table provides the resulting total profit per month as a function of the action taken and the random outcome regarding the component price
(a) Develop the associated decision tree and determine which action should be adopted.
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