Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A Manufacturing Company must make a decision regarding the level of sales and dedication to a new product. There are 2 possible decisions to be

image text in transcribed
A Manufacturing Company must make a decision regarding the level of sales and dedication to a new product. There are 2 possible decisions to be evaluated. The potential profit from each decision alternative depends on the market acceptance which may be high moderate or low. If market acceptance is high, each of the two decision alternatives, dl and d2, will yield a profit of 310 and 280 thousand dollars respectively. If the demand turns out to be moderate, then the profits will be 120 and 90 thousand dollars respectively. If the demand turns out to be low, then the profits will be - 70 and -10 thousand dollars respectively. The prior probability estimates of demand to be high, moderate and low are 0.45, 0.35 and 0.2 respectively, The company first needs to decide whether to hire an expert to provide more accurate information regarding the future demand levels or not. . Graph the decision tree and state the decision strategy using the following probabilities: P(F) -0.75 P(low F) -0.1 P(low U) -0.5 P(High) - 0.45 (moderate | F) -0.2 P(moderate U) -0.4 P(moderate) -0.35 P(High F) -0.7 P(High (U) - 0.1 P(Low) -0.2 P(U)= 0,25 Which of the decision alternatives should be selected by the company? Calculate and interpret the expected profit from the best decision alternative

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

IT Security Risk Control Management An Audit Preparation Plan

Authors: Raymond Pompon

1st Edition

1484221397, 978-1484221396

More Books

Students also viewed these Accounting questions

Question

What is the relationship between a database and a knowledge base?

Answered: 1 week ago