Given is a decision payoff table with future demand probabilities. Answer allbel

Question

Given is a decision payoff table with future demand probabilities. Answer allbelow Future Demand Moderate lternatives Low High Small Facility 12 20 0.35 12 Medium Facility arge Facility robabilities 0.35 0.3 a) The EMV (Expected Monetary Value) for small facility is b) The EMV (Expected Monetary Value) for medium facility is = c) The EOL (Expected Opportunity Loss Regrets) for medium facility is d) The EOL (Expected Opportunity LossRegrets) for large facility is e) The best decision by using EMV is to select the f) The best decision by using EOL is to select the (in 1 decimal place) (in 1 decimal place) (in 2 decimal places) (in 2 decimal places) facility facility

Explanation / Answer

a) EMV for small facility = (0.35*7)+(0.3*8)+(0.35*7) = 7.3

b) EMV for medium facility = (0.35*6)+(0.3*12)+(0.35*12) = 9.9

For (c) and (d) part, we have to prepare opportunity loss table matrix first.

c) EOL for medium facilities = (0.35*1)+(0.3*0)+(0.35*8) = 3.15

d) EOL for large facilities = (0.35*11)+(0.3*6)+(0.35*0) = 5.65

e) For this part, we have to find the EMV of large facilitiy also. So,

EMV for large facility = (0.35*(-4))+(0.3*6)+(0.35*20) = 7.4

Hence, More is the EMV, better is the facility. Hence, the best decision by using EMV is to select the medium facility.

f) Since Max EMV decision = Min EOL decision, so lesser is the EOL, better is the facility.

The best decision by using EOL is to select the medium facility.

Thanks, and please leave an upvote if you understood the solution.

Alternatives Low Medium High Small Facilities 0 4 13 Medium Facilities 1 0 8 Large Facilities 11 6 0 Probabilities 0.35 0.3 0.35

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