Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

this is a question I ask previously and only part of it was answered. E, F, G was never answered thank you Mick Karra is

this is a question I ask previously and only part of it was answered. E, F, G was never answered thank you

Mick Karra is the manager of MCZ Drilling Products, which produces a variety of specialty Valves for oil equipment. Recent activity in the oil fields has caused demand to increase drastically, and a decision has been made to open a new manufacturing facility. Three locations are being considered and the size of the facility would not be the same in each location. Thus, overtime might be necessary at times. The following table gives the total monthly cost (in $1,000s) for each possible location under each demand possibility. The probabilities for the demand levels have been determined to be 20% for low demand, 30% for medium demand, and 50% for high demand.

Demand is low Demand is medium Demand is High
Ardmore, Ok 85 110 150
Sweetwater, Tx 90 100 120
lake Charles, LA 110 120 130

(a) Which location would be selected based on the optimistic criterion? (b) Which location would be selected based on the pessimistic criterion? (c) Which location would be selected based on the minimax regret criterion? (d) Which location should be selected to minimize the expected cost of operation? (e) How much is a perfect forecast of the demand worth? (f) Which location would minimize the expected opportunity loss? (g) What is the expected value of perfect information in thissituation?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Students also viewed these Accounting questions