# 2010 03 21 210212 ArmyGuySunday

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2010 03 21 210212 ArmyGuySunday
K Brown is the principal owner of Brown oil inc, after quitting his university teachihng job, ken has been able to increase his annual salary by a factor of over 100. at the present time, ken is forced to consider purchasing some more equipment for brown oil because of competition. His alternatives are showing in the following table: Equipment Favorable Market \$ Unfavorable Market\$ Sub 100 300,000 -200,000
Oiler J 250,000 -100,000
Texan 75,000 -18,000 For ex, if ken purchases a Sub 100 and if there is a favorable market he will realize a provit of 300,000. On the other hand if the market is unfavorable ken will suffer a loss of 200,000. But ken has alwasy been very optimistic decison maker
a) what type of decision is Ken facing
Decision under uncertainty
b) what decison criterion should he use?
Maximax
c) what alternative is best
He should choose Sub100, since it has the best possible outcome. 2) although Ken (above) is the principal owner, his bother bob is credit with making the company a sucess. Bob is vice president of fincance. Bob attributes his sucess to hsi pessimistic attitude about business and oil industry. Give the information from the previous problem is it likely bob will arive at a different decision? What deicison criterion should bob use, and what alternative will he select? He should use the minimax regret criterion, minimizing the worst-case scenario. He would select Texan
3) Megley cheese company is a small manu. of several chees products. On of the producst is a cheese spread. That is sold in reail outlets. jason must decide home many cases of cheese spread to manufacture each month. The probabily that the demand will be 6 case is 0.1 for 7 cs is 0.3 for 8 cs is 0.5 and 9 cs is 0.1. the cost of ever case is \$45 adn the price that jason gets for each case is \$95. Unfortunately any cases not sold by the end of the month are of no vaule cus the spoil. Home cases of cheese should janson manufacture each month?
Cost
45

Revenue
95

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