Sample Question 1 (from prior exam) Spicy-Icey, a frozen pizza company, is launching a new product into the market. It is deciding on the combination (i.e., combo) of toppings to put on the pizza. The more toppings on a pizza, the higher the price and the less it will sell, but Spicy makes more margin (price minus cost) on each pizza sold. There are 4 options with margins of: $1.00, $1.50, $2.00 and $2.50 per pizza sold. They believe there will be three payoffs or outcomes in terms of Sales in millions of pizzas (i.e., M pizzas): Good, Better, and Best. Spicy has created the following spreadsheet to use the Expected Monetary Value (EMV), Minimax Regret, or Maximax criteria to make the decision. 1 2 Combo Margin 3. S 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 13 A $1.00 $1.50 Combo Margin $2.00 $2.50 B22: = Probability $1.00 $1.50 $2.00 $2.50 Best Combo Margin F11: = B C Payoffs: Sales (M pizzas) Maximum EMV: Good 250 200 150 100 Maximin (Pessimist): Maximax (Optimist): Better 400 350 225 200 Payoffs: Margin (SM) Good 40% $250 $300 $300 $250 $300 Better 50% $400 $525 $450 $500 $525 c. What formula should be put into cell F11: D Good $1.00 $50 $1.50 $O $2.00 $0 $2.50 $50 a. What formula should be put into cell C13 in the Payoffs Margins Table: Best 500 400 350 300 Regrets: Margin (SM) Bettor $125 $0 $75 $25 Best 70% $500 $600 $700 $750 $750 b. What formula should he put into cell B22 in the $2.50 Regrets Margins Table: Best $250 $150 $50 $0 E Maximum Regret $250 $150 $75 $50 Expected Margins(EMV) $350 $443 $415 $425 d. What decision is best for each type of decision-maker? Why do you say that? G Minimum 250 200 150 100 H Maximum $500 $600 $700 $750