Question
In: Statistics and Probability
A company is considering three options for managing its data processing operation: continuing with its own...
A company is considering three options for managing its data processing operation: continuing with its own staff, hiring an outside vendor to do the managing, or using a combination of its own staff and an outside vendor. There are three levels of demand under consideration: high, medium, and low. The annual profit associated with each option (in $1,000) for each level of demand is given below:
Demand Level
Staffing Options High Medium Low
Own staff 950 900 650
Outside vendor 850 650 500
Combination 1000 800 400
3. For the problem given above, the probabilities are given by P(high demand) = 0.4, P(medium demand) = 0.3, and P(low demand) = 0.3.
(a) Compute the expected value for each decision and select the best one.
(b) Compute the expected regret value for each decision and select the best one.
(c) Calculate and interpret the expected value of perfect information.
Solutions
orchestra answered 2 years agoRelated Solutions
Hudson Corporation is considering three options for managing its data processing operation: continuing with its own...
Hudson Corporation is considering three options for managing its
data processing operation: continuing with its own staff, hiring an
outside vendor to do the managing (referred to as outsourcing), or
using a combination of its own staff and an outside vendor. The
cost of the operation depends on future demand. The annual cost of
each option (in thousands of dollars) depends on demand as follows:
Demand Staffing Options High Medium Low Own staff 625 500 400
Outside vendor 850 650...
Hudson Corporation is considering three options for managing its data processing operation: continuing with its own...
Hudson Corporation is considering three options for managing its
data processing operation: continuing with its own staff, hiring an
outside vendor to do the managing (referred to as
outsourcing), or using a combination of its own staff and
an outside vendor. The cost of the operation depends on future
demand. The annual cost of each option (in thousands of dollars)
depends on demand as follows:
Demand
Staffing Options
High
Medium
Low
Own staff
650
450
300
Outside vendor
800
600...
Hudson Corporation is considering three options for managing its data warehouse: continuing with its own staff,...
Hudson Corporation is considering three options for managing its
data warehouse: continuing with its own staff, hiring an outside
vendor to do the managing (referred to as outsourcing), or
using a combination of its own staff and an outside vendor. The
cost of the operation depends on future demand. The annual cost of
each option (in thousands of dollars) depends on demand as
follows:
Demand
Staffing Options
High
Medium
Low
Own staff
650
600
500
Outside vendor
900
650
350...
The Gap is considering 3 options for managing its data processing operations: continue with its own...
The Gap is considering 3 options for managing its data
processing operations: continue with its own staff, hire an outside
vendor to do the managing (outsourcing), or use a combination of
its own staff and an outside vendor. The cost of operation depends
on future processing demand.
Demand
Staffing Options
High
Medium
Low
Own Staff
650
650
600
Outsource
900
600
300
Combination
800
650
500
(e) Suppose the probability demand will be high is 0.2 but the
other probabilities...
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing...
Dorsey Company manufactures three products from a common input
in a joint processing operation. Joint processing costs up to the
split-off point total $350,000 per quarter. For financial reporting
purposes, the company allocates these costs to the joint products
on the basis of their relative sales value at the split-off point.
Unit selling prices and total output at the split-off point are as
follows: Product Selling Price Quarterly Output A $ 20.00 per pound
13,000 pounds B $ 14.00 per...
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing...
Dorsey Company manufactures three products from a common input
in a joint processing operation. Joint processing costs up to the
split-off point total $335,000 per quarter. For financial reporting
purposes, the company allocates these costs to the joint products
on the basis of their relative sales value at the split-off point.
Unit selling prices and total output at the split-off point are as
follows:
Product
Selling Price
Quarterly
Output
A
$
17.00
per pound
12,400
pounds
B
$
11.00
per...
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing...
Dorsey Company manufactures three products from a common input
in a joint processing operation. Joint processing costs up to the
split-off point total $380,000 per quarter. For financial reporting
purposes, the company allocates these costs to the joint products
on the basis of their relative sales value at the split-off point.
Unit selling prices and total output at the split-off point are as
follows:
Product
Selling Price
Quarterly
Output
A
$
26.00
per pound
14,200
pounds
B
$
20.00
per...
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing...
Dorsey Company manufactures three products from a common input
in a joint processing operation. Joint processing costs up to the
split-off point total $97,000 per quarter. The company allocates
these costs to the joint products on the basis of their relative
sales value at the split-off point. Unit selling prices and total
output at the split-off point are as follows:
Product
Selling Price
Quarterly Output
A
$
4
per pound
14,000
pounds
B
$
5
per pound
19,000
pounds
C...
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing...
Dorsey Company manufactures three products from a common input
in a joint processing operation. Joint processing costs up to the
split-off point total $320,000 per quarter. For financial reporting
purposes, the company allocates these costs to the joint products
on the basis of their relative sales value at the split-off point.
Unit selling prices and total output at the split-off point are as
follows:
Product
Selling Price
Quarterly
Output
A
$
14.00
per pound
11,800
pounds
B
$
8.00
per...
Joes Company manufactures three products from a common input in a joint processing operation. Joint processing...
Joes Company manufactures three products from a common input in
a joint processing operation. Joint processing costs up to the
split-off point total $350,000 per quarter. For financial reporting
purposes, the company allocates these costs to the joint products
on the basis of their relative sales value at the split-off point.
Unit selling prices and total output at the split-off point are as
follows
Product
Selling Price
Quarterly
Output
A
$
20.00
per pound
13,000
pounds
B
$
14.00
per...
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