GBA440 Midterm Exam New (100% answer) /GBA440 Midterm Exam New (100% answer)

  

Question

Question 1. A plant manager is considering buying additional stamping machines to accommodate increasing demand. The alternatives are to buy 1 machine, 2 machines, or 3 machines. The profits realized under each alternative are a function of whether their bid for a recent defense contract is accepted or not. The payoff table below illustrates the profits realized (in $000's) based on the different scenarios faced by the manager.

  

Alternative

Bid Accepted

Bid Rejected

 

Buy 1 machine

$10

$5

 

Buy 2 machine

$30

$4

 

Buy 3 machine

$40

$2

Using the information above, which alternative should be chosen based on the maximax criterion?

Buy 1 machine

Buy 2 machines

Buy 3 machines

Question 2. A plant manager is considering buying additional stamping machines to accommodate increasing demand. The alternatives are to buy 1 machine, 2 machines, or 3 machines. The profits realized under each alternative are a function of whether their bid for a recent defense contract is accepted or not. The payoff table below illustrates the profits realized (in $000's) based on the different scenarios faced by the manager.