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QUESTION I Decision Analysis
Show all calculations to support your answers.
(a)Describe the advantage in using a payoff matrix to analyse decisions. Explain the steps required in developing such a matrix.(b)What advantage do decision trees provide and in what situations are they preferred to a payoff matrix?(c)George
Goleb is considering the purchase of two types of industrial robots.
The ROB1 is a large robot capable of performing a variety of tasks,
including welding and painting. The ROB1 is a smaller and slower robot,
but it has all the capabilities of ROB1. The robots will be used to
perform a variety of repair operations on large industrial equipment. Of
course, George can always do nothing and not buy any robots.
market for the repair operation could be either favourable or
unfavourable. If the market is favourable ROB1 is expected to return
550,000 profit and ROB2 S30,000 profit. If the market is unfavourable
ROB1 is expected to lead to a loss of $40,000 and ROB2 to a loss of
1.Construct a payoff matrix showing the 3 possible
alternatives and the associated profits or losses under the 2 market
conditions.2.Showing all calculations, what is the optimum action and its expected payoff if George is an optimist?3.Showing all calculations, what is the optimum action and its expected payoff if George is a pessimist?4.Showing all calculations, what is the optimum action and its expected payoff if George follows the Laplace criterion?5.Showing all calculations, what is the optimum action and its expected payoff if George uses the criterion of regret?6.If
George believes that the probability of a favourable market is 0.6,
showing all calculations determine the optimum action and expected
return.7.What is the expected value of perfect information?
QUESTION 2 Value of information
all calculations to support your answers. You may follow the methods
shown in the mp4 on Value of Info for a way to answer this question if
Round all probability calculations to 2 decimal places.
Referring to Q1c, Recall the optimum action based on expected values was to purchase R081 with an EMV of S14,000.
Goleb is considering the possibilityof conducting a survey on the
market potential for industrial equipment repair using robots. The cost
of the survey is 55,000.
The market survey results can be
classified as positive or negative. Given past experience with the
market survey personnel, the conditional probabilities are gpositive
signallfavourable market = 0.9 and pktegative signallunfavouroble
market) = 0.8.
a)Revise the prior probabilities of 0.6 and 0.4 in light of these likely survey results.b)What is the posterior probability of a favourable market given a positive survey result?c)Calculate the EVSI and ENGSI.d)What is the maximum the firm should pay for the market survey?QUESTION 3 Simulation
This is a work integrated assessment item. The tasks are similar to what would be carried out in the workplace.
have just been hired as an analyst to assist the manager of ABC
airlines. Your first assignment is to examine and report on the
profitability and policies of the airline.
ABC Airlines flies a
six-passenger commuter flight once a day to Myrtle Beach.
Anon-refundable one-way fare with a reservation costs $79.
daily demand and probability distribution for this flight are shown
below along with the probabilitydistribution of no-shows. A no-show has a
reservation but does not arrive at the gate and forfeits the fare.
there are not enough seats for a passenger at the gate ABC Airlines
refunds his or her fare and also provides $50 compensation. The fixed
cost for each flight is $350, regardless of the number of passengers.
Set up a simulation model and calculate ABC’s profit each day for a
month (30 days) and the average profit per flight. There are to be no
numbers in the model (only in the data section), and only formulas in
the model. Print in WORD the output and then the formulas.2.ABC
would like to investigate the profitability of varying the fare and the
compensation for overbooking. What is your recommendation?3.Write
report with your comments on the profitability of the airline and any
recommendations you may have for improvement. (no more than 300 words
but you may also include any variations in your spreadsheet to
demonstrate your points). Address your report to the manager and sign
QUESTION 4 Regression Analysis
is a small business school that offers an MBA program. The main entrance
criterion for admission to the MBA program is the Graduate
ManagementAdmission Test (GMAT) score (maximum score =800). The
following table provides the GPAs (Grade Point Averages)of 12 students
who have graduated recently along with their GMAT scores and ages.
Excel, perform three regression analyses to regress GPA against GMAT
score, then against Age, then against both of them simultaneously. Paste
your results into Word. State the cost equation from each. Analyse and
comment on the results of each regression as you perform it and
determine the best one to use as a basis for future use.2.If you had
to settle for the results of a simple regression, which one would you
use and why? Explain any reservations you might have with your
selection.3.A new graduate student has a GMAT score of 600 and is 29
years old. Using the multiple regression output what is this student’s
predicted GPA? QUESTIONS CVP Analysis
Guide to student marks: 20: 6 for a, 4 for b (2+2), 4 for c, 6 for d
A sells for $12 per unit. The variable cost is S6 per unit. Fixed costs
are $1,200. What is the breakeven point in (i) units, and (ii) dollars?2.How many units are required to earn a target level of profit before tax of $600? What is the margin of safety?3.What profit would be earned by selling 250 units?4.A
second product B is added, selling for S20 per unit with a variable
cost of $8. Total fixed costs for both products are $5,200. A and B are
sold in the ratio of 2 of A to 1 of B. Given a tax rate of 30c in the
dollar, how many units of each product are required to earn a profit
after tax of S1,400?
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