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Your assignment for this week is to do Problems 3.1, 3.2, 3.3 below. This assignment must be in Excel/QM and submitted through Assignment. Also provide a written response for each part of each question. (See rubric below.)
3.1) A manager needs to hire short-term employees to meet production demands. The manager would like to hire one of three possible short-term workers. Ten hours are demanded with 50% probability, 20 hours are demanded with 30% probability, and 30 hours are demanded with 20% probability. The table below represents the alternatives and possible states of nature.
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States of Nature
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(Worker hrs. demanded)
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Alternatives
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10 hr. total pay
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20 hr. total pay
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30 hr. total pay
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Worker 1
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$1,000.00
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$1,800.00
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$2,400.00
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Worker 2
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$900.00
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$1,800.00
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$2,500.00
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Worker 3
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$950.00
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$1,750.00
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$2,500.00
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a) Which alternative will minimize the expected monetary value?
b) What is the expected value of perfect information?
3.2) The following payoff table provides profits based on various possible decision alternatives and various levels of demand.
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States of Nature
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Demand
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Alternatives
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Low
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Medium
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High
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Alternative 1
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80
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120
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140
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Alternative 2
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90
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90
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90
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Alternative 3
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50
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70
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150
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The probability of a low demand is 0.4, while the probability of a medium and high demand is each 0.3.
(a) What decision would an optimist make?
(b) What decision would a pessimist make?
(c) What is the highest possible expected monetary value?
(d) Calculate the expected value of perfect information for this situation.
3.3) Orders for clothing from a particular manufacturer for this year’s Christmas shopping season must be placed in February. The cost per unit for a particular dress is $20 while the anticipated selling price is $50. Demand is projected to be 50, 60, or 70 units. There is a 40 percent chance that demand will be 50 units, a 50 percent chance that demand will be 60 units, and a 10 percent chance that demand will be 70 units. The company believes that any leftover goods will have to be scrapped. How many units should be ordered in February? (Calculations and formulas for all data in the Decision Table must be provided for credit. Answers not in Excel QM and without calculations and formulas for the data will not receive credit.)
Rubric for Problems:
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Criteria
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Excellent
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Average
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Poor
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Points
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8-10 points
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6-7 points
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0-5 points
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Submission fully addresses questions listed in the problem. Answer is consistent and supported by Excel QM spreadsheets/results.
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Response fully answers all parts listed in the question. Answer is consistent and supported by Excel QM spreadsheets as a separate document. All calculations are shown.
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Response partially answers all parts listed in the question. Answer is consistent and supported by Excel QM spreadsheets as a separate document. Most calculations are shown.
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Response partially answers few parts listed in the question. Answer is not consistent with supporting Excel QM spreadsheets. Most or all calculations not provided.
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There must be a written response to each part of the question. This can be inside the corresponding Excel QM spreadsheet.
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Each part of each question is fully answered and explained. All Excel QM or additional calculations are shown if they are required.
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Most questions are fully answered and explained. All Excel QM or additional calculations are shown if they are required.
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Few question are answered and explained. Few to no Excel QM or additional calculations are shown if they are required.
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Academic Integrity and Syntax:
Academic Integrity
Spelling and grammar
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Work is original.
Adheres to all spelling and grammar rules
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Work is original
Few grammar and spelling errors
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All or portions of the work are not original
Follows few or does not follow grammar and spelling rules
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Timely submission
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Entire assignment successfully submitted through Turn-it-in on or before due date.
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Most of the assignment submitted, on or before due date.
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Part or entire assignment submitted within 3 days after the due date.
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