Homework Help is Here – Start Your Trial Now!
Business
Operations Management
A circus is scheduled to appear in a city on a given date. The profits obtained are heavily dependent on the weather which can be classified as "good" or" bad". The circus owners may choose to setup operations in a large open field that is centrally located or rent a small building to stage a small version of the circus. The small building is not expected to be adversely affected by bad weather – thus will not affect the circus for it is well secure and has covered parking for the guests. The following shows the profits of the options and states of nature: Decision alternatives Set up in field Rent small building Probability States of nature Good $14,500 $5,000 P(G)=0.5 Bad -$15,000 $4,000 P(B)=0.5 The circus owners may choose to delay the decision until the day before the event is due. At this time they can obtain the one-day weather report (free) which is usually reliable. This delay will however increase their set up cost by $1000.00 or if they choose to rent, the rental cost will go up by $1500. The following is the reliability of the weather forecasters who will report that the weather will be either rainy or sunny: Forecast report Sunny Rainy Reliability of forecast Good 0.7 0.3 Bad 0.2 0.8 That is P(S/G) =0.7; P(R/G) =0.3; P(S/B) =0.2; P(R/B) =0.8 After you have computed the revised probabilities round to two decimal places a) Construct the appropriate decision tree to help the circus make the appropriate decisions. This tree must be constructed in logical order with labels and net payoffs the revised probabilities b) Fold back the decision tree It also includes to determine the best strategy for the circus; you must state

A circus is scheduled to appear in a city on a given date. The profits obtained are heavily dependent on the weather which can be classified as "good" or" bad". The circus owners may choose to setup operations in a large open field that is centrally located or rent a small building to stage a small version of the circus. The small building is not expected to be adversely affected by bad weather – thus will not affect the circus for it is well secure and has covered parking for the guests. The following shows the profits of the options and states of nature: Decision alternatives Set up in field Rent small building Probability States of nature Good $14,500 $5,000 P(G)=0.5 Bad -$15,000 $4,000 P(B)=0.5 The circus owners may choose to delay the decision until the day before the event is due. At this time they can obtain the one-day weather report (free) which is usually reliable. This delay will however increase their set up cost by $1000.00 or if they choose to rent, the rental cost will go up by $1500. The following is the reliability of the weather forecasters who will report that the weather will be either rainy or sunny: Forecast report Sunny Rainy Reliability of forecast Good 0.7 0.3 Bad 0.2 0.8 That is P(S/G) =0.7; P(R/G) =0.3; P(S/B) =0.2; P(R/B) =0.8 After you have computed the revised probabilities round to two decimal places a) Construct the appropriate decision tree to help the circus make the appropriate decisions. This tree must be constructed in logical order with labels and net payoffs the revised probabilities b) Fold back the decision tree It also includes to determine the best strategy for the circus; you must state

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section2.7: Decisions Involving The Time Value Of Money
Problem 15P
See similar textbooks
icon
Related questions
Question
A circus is scheduled to appear in a city on a given date. The profits obtained are heavily dependent on the weather which can be classified as "good" or" bad". The circus owners may choose to setup operations in a large open field that is centrally located or rent a small building to stage a small version of the circus. The small building is not expected to be adversely affected by bad weather – thus will not affect the circus for it is well secure and has covered parking for the guests. The following shows the profits of the options and states of nature: States of nature Decision alternatives Set up in field Rent small building | Probability Good Bad $14,500 $5,000 -$15,000 $4,000 P(G)=0.5 P(B)=0.5 The circus owners may choose to delay the decision until the day before the event is due. At this time they can obtain the one-day weather report (free) which is usually reliable. This delay will however increase their set up cost by $1000.00 or if they choose to rent, the rental cost will go up by $1500. The following is the reliability of the weather forecasters who will report that the weather will be either rainy or sunny: Reliability of forecast Forecast report Sunny Rainy Good Bad 0.7 0.2 0.3 0.8 That is P(S/G) =0.7; P(R/G) =0.3; P(S/B) =0.2; P(R/B) =0.8 After you have computed the revised probabilities round to two decimal places a) Construct the appropriate decision tree to help the circus make the appropriate decisions. This tree must be constructed in logical order with labels and net payoffs the revised probabilities b) Fold back the decision tree It also includes to determine the best strategy for the circus; you must state
Transcribed Image Text:A circus is scheduled to appear in a city on a given date. The profits obtained are heavily dependent on the weather which can be classified as "good" or" bad". The circus owners may choose to setup operations in a large open field that is centrally located or rent a small building to stage a small version of the circus. The small building is not expected to be adversely affected by bad weather – thus will not affect the circus for it is well secure and has covered parking for the guests. The following shows the profits of the options and states of nature: States of nature Decision alternatives Set up in field Rent small building | Probability Good Bad $14,500 $5,000 -$15,000 $4,000 P(G)=0.5 P(B)=0.5 The circus owners may choose to delay the decision until the day before the event is due. At this time they can obtain the one-day weather report (free) which is usually reliable. This delay will however increase their set up cost by $1000.00 or if they choose to rent, the rental cost will go up by $1500. The following is the reliability of the weather forecasters who will report that the weather will be either rainy or sunny: Reliability of forecast Forecast report Sunny Rainy Good Bad 0.7 0.2 0.3 0.8 That is P(S/G) =0.7; P(R/G) =0.3; P(S/B) =0.2; P(R/B) =0.8 After you have computed the revised probabilities round to two decimal places a) Construct the appropriate decision tree to help the circus make the appropriate decisions. This tree must be constructed in logical order with labels and net payoffs the revised probabilities b) Fold back the decision tree It also includes to determine the best strategy for the circus; you must state
Expert Solution
steps

Step by step

Solved in 3 steps with 4 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Follow-up Questions
Read through expert solutions to related follow-up questions below.
Follow-up Question

  1. Fold back the decision tree (5 marks) to determine the best strategy for the circus; you must state this strategy (1 mark). What is the final expected profit?

Solution
Bartleby Expert
SEE SOLUTION
Similar questions
Recommended textbooks for you
Practical Management Science
Practical Management Science
Operations Management
ISBN:
9781337406659
Author:
WINSTON, Wayne L.
Publisher:
Cengage,
Purchasing and Supply Chain Management
Purchasing and Supply Chain Management
Operations Management
ISBN:
9781285869681
Author:
Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:
Cengage Learning
SEE MORE TEXTBOOKS