Senior management at Humber bakery requested a new analysis based on adjusting the selling price and...

 

  
 

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Senior management at Humber bakery requested a new analysis based on adjusting the selling price and the number of units produced under each production plan. Initial probability estimates are also updated. Resulting gross profits ($) and state of nature probabilities are given in the following payoff table. Light Production Moderate Production Heavy Production Probability Low Demand Medium Demand High Demand 12,540 -1,920 -47,710 0.5 36,000 45,000 7,030 0.1 36,000 45,000 65,680 0.4 The new analysis also necessitated updating the offer made to Bramptinos under the heavy production plan. If Humber chooses the heavy production plan, the probability that Bramptinos will accept the new offer is 27% and the associated gross profit is determined to be $68,600. Again here, if Bramptinos declines the offer, the loaves will still sell based on current demand conditions (low, medium, or high). Use the decision tree you selected from Part A, along with the payoffs and probabilities provided on this page, to construct a decision tree for the problem. 1. No Sample Information What is the expected monetary value and associated decision for the optimal alternative? Max EMV = $ The optimal decision is [Select an answer II. Sample Information production. As noted earlier, Humber is considering hiring Professor Leung to conduct a market research survey. It is now determined that the results of the survey will indicate a favourable market condition with 52% chance. Otherwise, it will indicate an unfavourable market condition. If the survey provides a favourable outlook, the revised probabilities of medium and low demand are 0.32 and 0.27 respectively. If unfavourable, the probabilities calculated for low and medium demand are 0.46 and 0.34 respectively. a. What is the best expected monetary value and associated decision under a favourable survey outcome? Max EMV = $ 84,450 The optimal decision is Light X * production. b. What is the best expected monetary value and associated decision under an ufavourable survey outcome? Max EMV = $ 88,080 The optimal decision is [Select an answer X X production. c. What is the value with the sample information? EV with SI = $ 86,265 X d. What is the value of the sample information (EVSI)? EVSI = $ 28,755 e. What is the optimal decision strategy if Professor Leung's consulting fees were $6,499. Conduct the market survey. If favourable, choose the Moderate plan. If unfavourable choose the Light plan Senior management at Humber bakery requested a new analysis based on adjusting the selling price and the number of units produced under each production plan. Initial probability estimates are also updated. Resulting gross profits ($) and state of nature probabilities are given in the following payoff table. Light Production Moderate Production Heavy Production Probability Low Demand Medium Demand High Demand 12,540 -1,920 -47,710 0.5 36,000 45,000 7,030 0.1 36,000 45,000 65,680 0.4 The new analysis also necessitated updating the offer made to Bramptinos under the heavy production plan. If Humber chooses the heavy production plan, the probability that Bramptinos will accept the new offer is 27% and the associated gross profit is determined to be $68,600. Again here, if Bramptinos declines the offer, the loaves will still sell based on current demand conditions (low, medium, or high). Use the decision tree you selected from Part A, along with the payoffs and probabilities provided on this page, to construct a decision tree for the problem. 1. No Sample Information What is the expected monetary value and associated decision for the optimal alternative? Max EMV = $ The optimal decision is [Select an answer II. Sample Information production. As noted earlier, Humber is considering hiring Professor Leung to conduct a market research survey. It is now determined that the results of the survey will indicate a favourable market condition with 52% chance. Otherwise, it will indicate an unfavourable market condition. If the survey provides a favourable outlook, the revised probabilities of medium and low demand are 0.32 and 0.27 respectively. If unfavourable, the probabilities calculated for low and medium demand are 0.46 and 0.34 respectively. a. What is the best expected monetary value and associated decision under a favourable survey outcome? Max EMV = $ 84,450 The optimal decision is Light X * production. b. What is the best expected monetary value and associated decision under an ufavourable survey outcome? Max EMV = $ 88,080 The optimal decision is [Select an answer X X production. c. What is the value with the sample information? EV with SI = $ 86,265 X d. What is the value of the sample information (EVSI)? EVSI = $ 28,755 e. What is the optimal decision strategy if Professor Leung's consulting fees were $6,499. Conduct the market survey. If favourable, choose the Moderate plan. If unfavourable choose the Light plan

Answer rating: 100% (QA)

1 No Sample Information To calculate the EMV for the optimal alternative without sample information we multiply the payoffs by their corresponding pro... View the full answer