Determine decision tree and optimum alternative decision

Assignment Help Operation Management
Reference no: EM131435694

The Executives of the general products company (GPC) have to decide which of three products to introduce, A, B, or C. Product C is essentially a risk-free proposition, from which the company will obtain a net profit of $1 million. Product B is considerably more risky. Sales may be high, with resulting net profit of $8 million, medium net profit of $4 million, or low, in which case the company just breaks even (i.e. net profit = $0 million). The probabilities for these outcomes are Pr(Sales High for B) = 0.38 Pr(Sales Medium for B) = 0.12 Pr(Sales Low for B) = 0.50 Product A poses something of a difficulty; a problem with the production system has not yet been solved. The engineering division has indicated its confidence in solving the problem, but there is a slight (5%) chance that devising a workable solution may take a long time. In this event, there will be a delay in introducing the product, and that delay will result in lower sales and profits. Another issue is the price for product A. The options are to introduce it at either high or low price; the price would not be set until just before the product is to be introduced. Both of these issues have an impact on the ultimate net profit. Finally, once product A is introduced, sales can either be high or low. If the company decides to set a low price, then low sales are just as likely as high sales. If the company sets a high price, the likelihood of low sales depends on whether the product was delayed by the production problem. If there was no delay and the company sets a high price, the probability is 0.4 that sales will be high. However, if there is a delay and the price is set high, the probability is only 0.3 that sales will be high. The following table shows the possible net profit figures (in millions) for, product A:

Price High sales ( $ million) Low sales ( $ million)

Time Delay High 5. -0.5

Low 3. 1.0

No Delay High 8. 0.0

Low 4. 1.5

What is required:

1)- Draw a complete decision tree for GPC

2)- Solve the decision tree and determine optimum alternative decision

3)- List at least 4 strategies available for the decision maker

4)- Develop the risk profile and cumulative risk profile for the system.

Reference no: EM131435694

Developing competitive compensation plan

XYZ, a construction company, has recently obtained a large project that requires them to hire 15 experienced welders in Casper, Wyoming. Casper has very few welders locally so

Social values dominate the discussion of internet gambling

At a time when the U.S. government is desperate to generate revenues, would I make sense for policymakers to license, regulate, and tax Internet gambling? Do the results of th

Does good management increase productivity

You have a colleague who is interested in studying her legal team’s experience related to marketing. She wants to send her employees a short email, but is not confident how sh

Do the african americans have case of disparate impact

Several African American applicants sued in a class-action suit a hi-tech company in the Southeast. They claimed that they were discriminated against because the percentage of

Compute the debt-equity ratio

Compute the debt-equity ratio for a hotel over a three-year period, and indicate whether the ratio is improving or declining in terms of the owners’ ability to meet long-term

Designing social media marketing plan

When designing a social media marketing plan, marketers must be sure to select and use channels as they were intended---or risk difficulties. For each of the following, state

Commercial orchard grows-picks and packs apples and pears

A commercial orchard grows, picks and packs apples and pears. A peck of (quarter bushel) of apples takes four minutes to pick and five minutes to pack; a peck of pears takes f

Firm must fulfill the needs of its four distribution centers

A dairy firm has tree plants located in a state, each day, firm must fulfill the needs of its four distribution centers. The dairy milk production at each plant, minimum requi

Reviews

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd