Edwards Machine Tools needs to purchase a new machine. The basic model is slower but costs less, whereas the advanced model is faster but costs more. Profitability will depend on future demand. The following table presents an estimate of profits over the next three years.

Demand VolumeDecisionLowMediumHighBasic model$65,000$75,000$170,000Advanced model$40,000$140,000$225,000

Fill in the table below for maximum and minimum profit payoffs under each model. Round your answers to the nearest dollar.

Decision alternativeMaximumMinimumBasic model$$Advanced model$$

Calculate the amounts foregone by not adopting the optimal course of action for each possible demand level. Determine the maximum opportunity cost for each model. Fill in the table below. If your answer is zero, enter "0". Round your answers to the nearest dollar.

Opportunity Loss MatrixFuture eventsDecision alternativeLowMediumHighMaximumBasic model$$$$Advanced model$$$$

Given the uncertainty associated with the demand volume, and no other information to work with, what decision would you make?

The aggressive strategy (maximax) is to choose the

-Select-

advanced model

basic model

The conservative strategy (maximin) is to choose the

-Select-

advanced model

basic model

The opportunity loss strategy is to choose the

-Select-

advanced model

basic model