Practical Management Science
Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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QUESTION TWO
(a) A payoff matrix has to be prepared with three alternative products A A,, 2 and A.. The
respective cost costs of these products are K2, K2.50 and K4 per unit and their sale prices
are K3, K4 and K5 per unit respectively. The normal production capacity of the plant for
production of each of the products A A,, 2 and A; is 3,000, 2,000 and 1,000 units
respectively.
i.
Showing all the working clearly, prepare the payoff table if the states of demand
are high (S.), moderate (S:) and low (S:) with respective demand levels of 3, 000,
2, 000 and 1, 000 units. The stocks unsold will be worth half the cost price for the
next period.
What is the maximax decision?
ii.
iii.
What is the maximin decision?
iv.
What is equally likely decision?
V.
What is the criterion of realism decision? Use a= 0.8
vi.
Develop an opportunity loss table and determine the minimax decision.
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Transcribed Image Text:QUESTION TWO (a) A payoff matrix has to be prepared with three alternative products A A,, 2 and A.. The respective cost costs of these products are K2, K2.50 and K4 per unit and their sale prices are K3, K4 and K5 per unit respectively. The normal production capacity of the plant for production of each of the products A A,, 2 and A; is 3,000, 2,000 and 1,000 units respectively. i. Showing all the working clearly, prepare the payoff table if the states of demand are high (S.), moderate (S:) and low (S:) with respective demand levels of 3, 000, 2, 000 and 1, 000 units. The stocks unsold will be worth half the cost price for the next period. What is the maximax decision? ii. iii. What is the maximin decision? iv. What is equally likely decision? V. What is the criterion of realism decision? Use a= 0.8 vi. Develop an opportunity loss table and determine the minimax decision.
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