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EBK BUSINESS ANALYTICS
3rd Edition
ISBN: 9780135231906
Author: Evans
Publisher: VST
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Textbook Question
Chapter 1, Problem 10PE
A manufacturer of headphones is preparing to set the price on a new design. Demand is thought to depend on the price and is represented by the model
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Students have asked these similar questions
Hayworth Corporation has Just segmented last year's income statement into its ten product lines. The chief executive officer (CEO) is curlous as to
what effect dropping one of the product lines at the beginning of last year would have had on overall company profit. What is the best number for the
CEO to look at to determine the effect of this elimination on the net operating income of the company as a whole?
Multiple Choice
the product line's sales dollars
the product line's contribution margin
the product line's segment margin
the product line's segment mergin minus an allocated portion of common fixed expenses
The Gorman Manufacturing Company must decide whether to manufacture a component part at its Milan, Michigan, plant or purchase the component part from a supplier. The resulting profit is dependent on the demand for the product. The following payoff table shows the projected profit (in thousands of dollars):
(bold and underline is answer/ --- = needs answer)
State of Nature
Low Demand
Medium Demand
High Demand
Decision Alternative
s1
s2
s3
Manufacture, d1
-20
40
100
Purchase, d2
10
45
70
The state-of-nature probabilities are P(s1) = 0.40, P(s2) = 0.40, and P(s3) = 0.20. Do not round your intermediate calculations.
(a)
Use a decision tree to recommend a decision.
Purchase Component Part
(b)
Use EVPI to determine whether Gorman should attempt to obtain a better estimate of demand. Enter your answer in thousands dollars. For example, an answer of $200 thousands should be entered as 200,000.
Gorman should attempt to obtain a better estimate of…
You are brand manager at Arrow Cosmetics and responsible for Silkskin body lotion. Silkskin's annual contribution is currently $2.1 million. The R&D department has just developed a new Aloe Vera-based body lotion formula. You must decide whether you want to change the formula for the Silkskin lotion or stay with the old one . The variable costs will be slightly higher for the new formula ($7.00 per bottle), but you guess that an increase in sales might compensate for the higher costs. You plan on selling the new Silkskinfor $ 12.00 per bottle. You can imagine three annual sales scenarios: 600,000 , 300,000 and 200,000 units sold, which you estimate the chances to be 30, 40, and .30, respectively.
1. Under which scenario (s) would you introduce the new Silkskin?
2. Would you introduce the new formula?
3.Imagine a market research firm that provides perfect information. In other words , if the firm tells you that annual sales will be "x", then sales will in fact be x. What is…
Chapter 1 Solutions
EBK BUSINESS ANALYTICS
Ch. 1 - Discuss how you might use business analytics in...Ch. 1 - How might analytics be used in the following...Ch. 1 - A supermarket has been experiencing long lines...Ch. 1 - For each of the following scenarios, state whether...Ch. 1 - Suppose that a manufacturer can produce a part for...Ch. 1 - A bank developed a model for predicting the...Ch. 1 - Four key marketing decision options are price P,...Ch. 1 - Total marketing effort is a term used to describe...Ch. 1 - A manufacturer of headphones is preparing to set...Ch. 1 - In this chapter, we noted the importance of...
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