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A factory is developing a substantial backlog and for this the firm's management is considering three courses of action: To arrange for subcontracting (S1), to
A factory is developing a substantial backlog and for this the firm's management is considering three courses of action: To arrange for subcontracting (S1), to begin overtime production (S2), and to push forward the project of constructing new facilities (S3). The correct choice depends largely upon the future demand, which may be low, medium or high. By consensus, management ranks the respective probabilities as 0.10,0.50 and 0.40. A cost analysis reveals the effect upon the profits. This is shown in the table below. Show this decision situation in the form of a decision tree and indicate the most preferred decision and its corresponding expected value
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