q5

The owner of the Party City Toronto Company must decide among building a mega centre store, building 5 new stores, or leasing 10 of their locations to another company. The profit that will result from each alternative will be determined by whether material costs remain stable, increase moderately, or increase significantly. In the payoff table below the estimated profits/losses are given in $thousands. Material Costs Moderate Significant Stable Increase Increase Mega 1800 1050 -170 Centre Decision New Stores 810 920 1030 Leasing 2250 500 -2400(a) Construct Opportunity Loss (Regret) Table Material Costs Stable Moderate Increase Significant Increase Mega Centre New Decision Stores Leasing (b) Determine the best decision using the Opportunity Loss decision criterion. O Decision: Leasing based on 3980 = min (1650,3980,1570) O Decision: New Stores based on min = 130 O Decision: Leasing based on 3430 = max(1200,1440,3430) O Decision: Mega Centre based on 1200 = min(1200,1440,3430)