Operations Management MGMT-370-01 Test:test1 This Question: 30 pts Brooke Newman

Question

Operations Management MGMT-370-01 Test:test1 This Question: 30 pts Brooke Newman 1 9/27/1 82:35 PM OLU Time Remaining: 01:20:37 Submit Test 2 of 41 This Test: 100 pts possible The following payoff table provides profits based on various possible decision altematives and various levels of demand at Robert Klassan's print shop Decision Low High $12,000 $36,000 Alternative 2 $4,000 $40,000 Alternative 3500$52.000 The probability of low demand is 0.40, whereas the probability of high demand is 0.60. The EMV for this decision is s(enter your answer as a whole number) b) The expected value with perfect information (EwPI)-$ (enter your answer as a whole number) o) The expected value of perfect information (EVPI) for Robert (enter your answer as a whole number).

Explanation / Answer

a)

EMV of alternative 1 = 12000*0.4+36000*0.6 = 26400

EMV of alternative 2 = 4000*0.4+40000*0.6 = 25600

EMV of alternative 3 = -15000*0.4+52000*0.6 = 30600

Alternative that provides the highest EMV is alternative 2

EMV of this decision is 30600

b) EVwPI = 0.4*12000+0.6*52000 = 36000

c) EVPI = EVwPI - Maximum EMV = 36000 - 30600

5400

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