1 answer

Jacava is considering producing a novelty item for golfers that will be sold through pro shops....

Question:

Jacava is considering producing a novelty item for golfers that will be sold through pro shops. Larry has decided on a selling price of $3.50 for the ite items variable cost of production is $2.00 per unit, with fixed costs of $3,750. Larry has marketed his product to local pro shops and believes the demand for the item will be either 2,000 units, 3,000 units, 4,000 units, or 5,000 units. a) Set up the payoff table for Larrys decision. Determine the number of units that Larry should produce using each of the following criteria: b) (i) maximax criterion (i) maximin criterion (ii) minimax regret criterion (iv) criterion of realism (a-0.7) (v) equally likely
Jacava is considering producing a novelty item for golfers that will be sold through pro shops. Larry has decided on a selling price of $3.50 for the ite item's variable cost of production is $2.00 per unit, with fixed costs of $3,750. Larry has marketed his product to local pro shops and believes the demand for the item will be either 2,000 units, 3,000 units, 4,000 units, or 5,000 units. a) Set up the payoff table for Larry's decision. Determine the number of units that Larry should produce using each of the following criteria: b) (i) maximax criterion (i) maximin criterion (ii) minimax regret criterion (iv) criterion of realism (a-0.7) (v) equally likely

Answers

a)

Assumed all excess produced units cannot be sold further.

Below are the images with the calculations and the payoff table:

AItemative Loss is -the vaunmobde oost unsdd Unsdd unils-excess

C&.uck.»)I ,.00 | 3000 |4b。 20Do 千So 12 o2So 33 so

(b)

(i) Maximax criterion:

Select maximum pay-off in each alternative and then, choose the maximum of such maximum of pay-offs which is shown below:

o maximax Demand I maximo乂 units

Under Maximax criterion, produce 5000 units.

(ii) Maximin criterion:

Select the minimum pay-off in each alternative and then, choose the maximum of such minimum pay-offs as shown here under:

Demand SO Maximin poyf7) -thus, the best olteano dive undo 2000 units

Under maximin criterion, produce 2000 units.

(iii) Minimax regret criterion:

First, draw the regret table where, regret =best pay-off - pay-off received. Select maximum regret in each alternative and then, choose the minimum of such maximum regrets which is the following:

Rept Table Alternating Minim 2000 3460 566 Maxim 2000 3obo units

Under minimax regret criterion, produce 3000 units.

(iv) Criterion of realism(alpha=0.7​​​​​​):

In each alternative, multiply alpha​ with the best return and multiply 1-alpha (i.e., 1-0.7 =0.3) with the worst return and add them. Then, the highest of such sums is to be chosen.

2000 units:

0.7(-750)+0.3(-750) = -750

3000 units:

0.7(750)+0.3(-2750) = -300

4000 units:

0.7(2250)+0.3(-4750) = 150

5000 units:

0.7(3750)+0.3(-6750) =600

The highest of above four sums is $600 in case of 5000 units​​​​​​. Thus, the best alternative under criterion of realism with alpha=0.7 is to produce 5000 units.

(v) Equally likely:

In each alternative, find the average of pay-offs and then choose the highest of such averages as shown in the below image:

4 兆1500

The highest average of -125 is at 3000 units. So, the best decision under equally likely criterion is to produce 3000 units.

.

Similar Solved Questions

1 answer
Bercise 14-03-b (Video) On January 1, 2020, Pharoah Corporation had $1,100,000 of common stock outstanding that was...
Bercise 14-03-b (Video) On January 1, 2020, Pharoah Corporation had $1,100,000 of common stock outstanding that was issued at par. It also had retained earnings of $742,500. The company issued 41,000 shares of common stock at par on July 1 and eamed net income of $405,000 for the year Journalize the...
1 answer
Set 1: (50 pts) 1. (20 pts) The diatomic iodine anion (12") has a vibrational frequency...
Set 1: (50 pts) 1. (20 pts) The diatomic iodine anion (12") has a vibrational frequency of approximately 110 cm Predict the total heat capacity of 1, in the gas phase at 300 K....
1 answer
Factory SCU Wastage (SCU) 2,750 Idle Capacity (SCU) 9,000 Total Capacity (SCU) 20,000 Product Forecast Sales...
Factory SCU Wastage (SCU) 2,750 Idle Capacity (SCU) 9,000 Total Capacity (SCU) 20,000 Product Forecast Sales In Stock Production Qty Avail Units for Sale Possible Qty SCU/unit SCU Adv3 18,000 150 16,650 30,000 0.50 8,250...
1 answer
2. (14 pts) Draw the major product for reactions H through M in the spaces provided....
2. (14 pts) Draw the major product for reactions H through M in the spaces provided. B12 NaOH BY2M 1. NaNH (3 equiv) : 1. Hg(OA)2, H2O. BH Cou' n 2. H2O 2. NaBHA J Acete K 105. L HOM HO Acetic acid M...
2 answers
How do you solve #3| x + 1| - 4\leq 8#?
How do you solve #3| x + 1| - 4\leq 8#?...
1 answer
A Chinook (King) salmon (Genus Oncorynchus) can jump out of water with a speed of 6.75 m/s
A Chinook (King) salmon (Genus Oncorynchus) can jump out of water with a speed of 6.75 m/s. If the salmon is in a stream with water speed equal to 1.65 m/s, how high in the air can the fish jump if it leaves the water traveling vertically upwards relative to the Earth?...
1 answer
Abortion perspective in religious way.
Abortion perspective in religious way....
1 answer
The following table shows the number of U.S. dollars required to buy one Mexican peso and...
The following table shows the number of U.S. dollars required to buy one Mexican peso and the number of U.S. dollars required to buy one Japanese yen between June 1, 2016, and September 1, 2016. Use this table to answer the following questions. Date June 1, 2016 July 1, 2016 August 1, 2016 September...
1 answer
In the manufacturing of a certain article, two types of defects are noted that occur with...
In the manufacturing of a certain article, two types of defects are noted that occur with probabilities 0.02, and 0.05, respectively. If these two defects occur independently of one another what is the probability that an article is free of both kinds of defects?...
1 answer
Frictionless Roller Coaster Problem
In the figure, a frictionless roller coaster car of mass m = 811 kg tops the first hill with speed v0 = 18 m/s at height h = 43 m. What is the speed of the car at point B?...
1 answer
You are the chairman of the department of surgery at an urban community hospital and the...
You are the chairman of the department of surgery at an urban community hospital and the head of a large general surgery practice. The oldest member of the group is about to retire, and you need to recruit a new partner. You are hoping to recruit a person relatively new out of training to provide su...
1 answer
Identify the errors in the following program segment.
Dim nums() As Integer = {1, 2, 3)For Each num as Integer In numsNum += 100NextMessageBox.Show(CStr(nums.Sum)...
1 answer
Imagine that a particular investor would like to invest in the two assets presented in the...
Imagine that a particular investor would like to invest in the two assets presented in the table below but since she is a rational investor, she wishes to run some analysis to see if the portfolio return and risk are matching with her investment standards and expectations. The financial information ...
1 answer
A rectangle has length 9 times its width. What is the ratio of its perimeter to the perimeter of the square of the same area?
A rectangle has length 9 times its width. What is the ratio of its perimeter to the perimeter of the square of the same area?...
1 answer
5. Which one of the following is nonaromatic? III IV I II A. IV B. I...
5. Which one of the following is nonaromatic? III IV I II A. IV B. I C. II D. III E. None 6. Which is the correct bond order for the C-C bonds in benzene? 1.0 20 1.25 1.75 1.5 1.5 20 10 A. III B. C. IV D. II E. None...
1 answer
A loop of wire with a clockwise current is in a uniform magnetic field that is...
A loop of wire with a clockwise current is in a uniform magnetic field that is in the plane of the loop. The loop has: A) both a net force and a net torque on it. (B) a net force on it but no net torque on it. (C) no net force on it but a net torque on it. (D) neither a net torque nor a net force on...
1 answer
(2 points) Brandon and Kayla have decided to borrow $17,100 to buy a new Honda Fit....
(2 points) Brandon and Kayla have decided to borrow $17,100 to buy a new Honda Fit. They were able to obtain a 5-year loan with an interest rate of 4.5%. Find their monthly payment. (2 points) Brandon and Kayla owe $36,000 on their student loans at an interest rate of 7%. The term is 20 years. Find ...
1 answer
Two sources of radio waves (call them 1 and 2) are separated by a distance d...
Two sources of radio waves (call them 1 and 2) are separated by a distance d along the x-axis in the plane, and emit sinusoidal waves of the same wavelength λ and frequency f in the N (+y), S (−y), E (+x), and W (−x) directions. (a) Suppose that we want to arrange the sources to b...