Using the optimistic criterion, which alternative is best?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Breakeven Analysis
Break Even Analysis is a term used in business, cost accounting and economics. It refers to a point where the total cost incurred becomes equal to the total revenue earned. Break Even Analysis determines the number of units to be sold to earn the revenue required to cover the total costs. Total cost is a sum total of fixed and variable costs.
Process analysis
The term process analysis can be defined as breakdown of production process into different phases that converts inputs into output. A series of routine activities are incorporated using organizational resources with a view to achieve operational excellence.
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Transcribed Image Text:4. A plant manager considers the operational cost per hour of five machine alternatives.
The cost per hour is sensitive to three potential weather conditions: cold, mild, and
warm. The following table represents the operations cost per hour for each alternative-
state of nature combination:
States of Nature
Weather related cost per hour
Alternatives Cold cost/day Mild cost/day Warm cost/day
$50
$45
$40
Machine 1
Machine 2
Machine 3
Machine 4
Machine 5
$40
$42|
$35
$25
$45
$47
$54
$48
$45
$60
$45
$40
Using the optimistic criterion, which alternative is best?
Using the pessimistic criterion, which alternative is best?
Transcribed Image Text:Using the equally likely criterion, which alternative is best?
Assume that for a randomly selected day, there is a 30% probability of cold weather,
50% probability of mild weather, and 20% probability of warm weather. What alternative
is best using EMV?
Assume that for a randomly selected day, there is a 30% probability of cold weather,
50% probability of mild weather, and 20% probability of warm weather. What is the
EVPI?
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