What is maximax and maximin approach, Cost Accounting

Build-Rite construction has received favorable publicity from guest appearances on a public TV home improvement program. Public TV programming decisions seem to be unpredictable, so Build -Rite cannot estimate the probability of continued benefits from it relationship with the show. Demand for home improvements next year may be either low or high. But Build-Rite must decide now whether to hire more employees, do nothing, or develop subcontracts with other home improvement contractors. Build-Rite has developed the following payoff table.

Payoffs

Demand For Home Improvements

Alternative

Low

Moderate

High

Hire

($250,000)

$100,000

$625,000

Subcontract

$100,000

$150,000

$415,000

Do nothing

$50,000

$80,000

$300,000

What is the decision based on each of the following criteria? Show work in making the decision for each criterion:

a)      Maximax

b)      Maximin

c)       Criterion of realism with coefficient of realism = 0.7

d)      Equally likely

e)      Minimax regret

Use the tables given below.

a)      Optimistic or Maximax Criterion

Payoffs

Demand For Home Improvements

 

Alternative

Low

Moderate

High

Hire

 

 

 

 

Subcontract

 

 

 

 

Do nothing

 

 

 

 

b)      Pessimistic or Maximin Criterion

Payoffs

Demand For Home Improvements

 

Alternative

Low

Moderate

High

Hire

 

 

 

 

Subcontract

 

 

 

 

Do nothing

 

 

 

 

c)       Criterion of realism with coefficient of realism = 0.7

Payoffs

Demand For Home Improvements

 

Alternative

Low

Moderate

High

Hire

 

 

 

 

Subcontract

 

 

 

 

Do nothing

 

 

 

 

d)  Equally likely or Principle of Insufficient Reason Criterion

Payoffs

Demand For Home Improvements

 

Alternative

Low

Moderate

High

 

Hire

 

 

 

 

Subcontract

 

 

 

 

Do nothing

 

 

 

 

e)      Minimax Regret Approach

Regrets

Demand For Home Improvements

 

Alternative

Low

Moderate

High

Hire

 

 

 

 

Subcontract

 

 

 

 

Do nothing

 

 

 

 

Posted Date: 4/1/2013 5:48:23 AM | Location : United States







Related Discussions:- What is maximax and maximin approach, Assignment Help, Ask Question on What is maximax and maximin approach, Get Answer, Expert's Help, What is maximax and maximin approach Discussions

Write discussion on What is maximax and maximin approach
Your posts are moderated
Related Questions
Presented below is a list of terms relating to cost behavior, followed by definitions of those terms: a. Rent on a factory building b. Engineering approach c. Fixed cost

What are the four elements of the budgeting cycle?

Budgetary Planning and Control Budgeting refers to the process of quantifying the plans of an organization such as to enable it get its objectives in the defined duration.  Th

explain any five qualities of accounting profession

Determine Inventory Costs Mary Cosmetics sells specialty lipstick for a retail price of $12.25 each. Mary purchases each tube for $5.00 and pays the following additional amounts: $

Accrued income is an amount earned although not in reality received during the accounting period or till the date of preparation of last accounts for the period concerned. The firs


cost accounting is said to three different phases ?? name them.

Occurrence of Overhead Variances Overhead variances arise mainly because of the conventions of the overheads absorption process. The overhead absorption rates employed in this

Flying High Company manufactures model airplanes. During the month, it manufactured 10,000 airplanes. Each one used an average of 6.5 direct labor hours and an average of 1.5 sheet