quantitative decisions in business This assignment must be in Excel/QM and submi
ID: 411570 • Letter: Q
Question
quantitative decisions in business
This assignment must be in Excel/QM and submitted through Assignment. Also provide a written response for each part of each question. (See rubric below.)
3.1) A manager needs to hire short-term employees to meet production demands. The manager would like to hire one of three possible short-term workers. Ten hours are demanded with 50% probability, 20 hours are demanded with 30% probability, and 30 hours are demanded with 20% probability. The table below represents the alternatives and possible states of nature.
States of Nature
(Worker hrs. demanded)
Alternatives
10 hr. total pay
20 hr. total pay
30 hr. total pay
Worker 1
$1,000.00
$1,800.00
$2,400.00
Worker 2
$900.00
$1,800.00
$2,500.00
Worker 3
$950.00
$1,750.00
$2,500.00
a) Which alternative will minimize the expected monetary value?
b) What is the expected value of perfect information?
States of Nature
(Worker hrs. demanded)
Alternatives
10 hr. total pay
20 hr. total pay
30 hr. total pay
Worker 1
$1,000.00
$1,800.00
$2,400.00
Worker 2
$900.00
$1,800.00
$2,500.00
Worker 3
$950.00
$1,750.00
$2,500.00
Explanation / Answer
a) Alternative worker 1
Expected monetary value = 0.50 * $ 1000 + 0.30 * $ 1800 + 0.20 * $ 2400
Expected monetary value = $ 1520
Alternative worker 2
Expected monetary value = 0.50 * $ 900 + 0.30 * $ 1800 + 0.20 * $ 2500
Expected monetary value = $ 1490
Alternative worker 3
Expected monetary value = 0.50 * $ 950 + 0.30 * $ 1750 + 0.20 * $ 2500
Expected monetary value = $ 1500
Choosing worker 2 will minimize the expected monetary value.
________________________________________________________________________________
Expected values of perfect imformation can be computed as the expected value with perfect information minus the expected value with existing information.
b) Expected values of perfect imformation = ( $ 1520 + $ 1500 + $ 1490 ) - ( $ 1490)
Expected values of perfect imformation = $ 3,020
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