Based on the conversation above, answer the following questions.a) Draw the decision tree related to the “Zeppelin” production, specifying the node numbersb) According to the node numbers specified in part a, what are the decision nodes and theevent nodes? Calculate the EMV for each of the nodes c) Opine whether Rio should take the help of Professor or not with proper justification d) Calculate the EVSI of this “Zeppelin” production, 1. "Zeppelin Zest"Rio: Last quarter of this financial year was not great. It is high time to start producing ourspecial cars "Zeppelin."Berlin: So what are the alternatives for the "Zeppelin" production?Rio: We have three alternatives; large plant, small plant, and no plant at all.Berlin: Have you considered market scenarios regarding demand?Rio: Definitely! As per our forecasting team, there can be three scenarios, i.e., high demand,moderate demand, and low demand for the "Zeppelin" production. The probability of the highdemand is 0.4 whereas there is an equal probability of moderate demand and low demand.The construction of large plant yields a profit of $200000 and $100000, for the high demandand the moderate demand, respectively. On the other hand, we will incur a loss of 120000 incase of low demand. The small plant results in the profit of $100000 and $50000, for highdemand and moderate demand, respectively, whereas it faces a loss of $20000 for lowdemand scenario.Berlin: You should collect more information regarding market scenario before jumping ontoconclusion. You can consult Professor, the famous market survey consultant. He knowsthings!Rio: Professor predicts positive market condition in 7 out of 10 cases. As per the historicaldata, when he predicts positive market condition, the probability of high demand and themoderate demand is 0.6 and 0.3, respectively. When Professor predicts negative marketcondition, the probability of low demand is 0.8 whereas there is an equal probability of thehigh demand and the moderate demand. Also, he charges a huge amount, $5000!Berlin: I don't think it's a huge amount. I feel we should take his advice.Rio: I am not very sure about it.

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Draw the decision tree related to the “Zeppelin” production, specifying the node numbers b) According to the node numbers specified in part a, what are the decision nodes and the event nodes? Calculate the EMV for each of the nodes c) Opine whether Rio should take the help of Professor or not with proper justification d) Calculate the EVSI of this “Zeppelin” production,

Draw the decision tree related to the “Zeppelin” production, specifying the node numbers b) According to the node numbers specified in part a, what are the decision nodes and the event nodes? Calculate the EMV for each of the nodes c) Opine whether Rio should take the help of Professor or not with proper justification d) Calculate the EVSI of this “Zeppelin” production,

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section: Chapter Questions

Problem 46P

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Scenario 4 Sharon Gillespie, a new buyer at Visionex, Inc., was reviewing quotations for a tooling contract submitted by four suppliers. She was evaluating the quotes based on price, target quality levels, and delivery lead time promises. As she was working, her manager, Dave Cox, entered her office. He asked how everything was progressing and if she needed any help. She mentioned she was reviewing quotations from suppliers for a tooling contract. Dave asked who the interested suppliers were and if she had made a decision. Sharon indicated that one supplier, Apex, appeared to fit exactly the requirements Visionex had specified in the proposal. Dave told her to keep up the good work. Later that day Dave again visited Sharons office. He stated that he had done some research on the suppliers and felt that another supplier, Micron, appeared to have the best track record with Visionex. He pointed out that Sharons first choice was a new supplier to Visionex and there was some risk involved with that choice. Dave indicated that it would please him greatly if she selected Micron for the contract. The next day Sharon was having lunch with another buyer, Mark Smith. She mentioned the conversation with Dave and said she honestly felt that Apex was the best choice. When Mark asked Sharon who Dave preferred, she answered, Micron. At that point Mark rolled his eyes and shook his head. Sharon asked what the body language was all about. Mark replied, Look, I know youre new but you should know this. I heard last week that Daves brother-in-law is a new part owner of Micron. I was wondering how soon it would be before he started steering business to that company. He is not the straightest character. Sharon was shocked. After a few moments, she announced that her original choice was still the best selection. At that point Mark reminded Sharon that she was replacing a terminated buyer who did not go along with one of Daves previous preferred suppliers. What does the Institute of Supply Management code of ethics say about financial conflicts of interest?
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