Question: Volkswagen Germany plans to manufacture six of
Volkswagen Germany plans to manufacture six of its models for the next near. Its manufacturing facility can produce Polo, Vento, Ameo, GTI, Tiguan, and Passat. Though it produces all these models, it wants to focus only on the car with the highest sales. It has learnt from economists that the market conditions in the coming year will have three mutually exclusive outcomes: Recession, Moderate, and Growth, with respective probabilities as 0.30, 0.25, and 0.45. Volkswagen has the following data that show how many cars it sold (in thousands) when similar conditions existed in the past. 
a. Using the expected value approach, which car will you suggest Volkswagen to focus on? b. Find the expected opportunity loss value.
> The Rowntown Cab Company has four cabs that are on duty during normal business hours. The cab company dispatcher receives requests for service every 8 minutes, on average, according to an exponential distribution. The average time to complete a trip is 2
> The University Bookstore is owned and operated by State University through an independent corporation with its own board of directors. The bookstore has three locations on or near the State University campus. It stocks a range of items, including textboo
> The Bay City Police Department has eight patrol cars that are on constant call 24 hours per day. A patrol car requires repairs every 20 days, on average, according to an exponential distribution. When a patrol car is in need of repair, it is driven into
> NesCafé has installed a coffee vending machine at an airport. The installed vending machine has the capacity to dispense 25 cups of coffee per hour. Currently, the demand for coffee on average is 22 cups per hour. NesCafé has noticed through its sales th
> In the Fast Shop Market example in this chapter, Alternative II was to add a new checkout counter at the market. This alternative was analyzed using the single-server model. Why was the multiple- server model not used?
> A vending machine at City Airport dispenses hot coffee, hot chocolate, or hot tea, in a constant service time of 20 seconds. Customers arrive at the vending machine at a mean rate of 60 per hour (Poisson distributed). Determine the average length of the
> An ATM at a busy airport disburses money or accepts deposits from customers. The ATM takes a constant time of 2 minutes to accept instructions and complete a transaction. If customers arrive at the rate of 20 per hour (Poisson distributed), a. Determine
> Game World, a video game arcade at Tanglewood Mall, has just installed a new virtual reality battle game. It requires exactly 2.7 minutes to play. Customers arrive, on average, every 2.9 minutes (Poisson distributed) to play the game. How long will the l
> McBurger’s fast-food restaurant has a drive-through window with a single server who takes orders from an intercom and also is the cashier. The window operator is assisted by other employees who prepare the orders. Customers arrive at the ordering station
> The Acme Machine Shop has five machines that periodically break down and require service. The average time between breakdowns is 4 days, distributed according to an exponential distribution. The average time to repair a machine is 1 day, distributed acco
> The Dynaco Manufacturing Company has an assembly line that feeds two drill presses. As partially completed products come off the line, they are lined up to be worked on as drill presses become available. The units arrive at the workstation (containing bo
> In Problem 10, the dean of the college of business at State University is considering the addition of a second adviser in the college advising office to serve students waiting to have their schedules approved. This new adviser could serve the same number
> During the past few years, the legislature has severely reduced funding for State University. In reaction, the administration at State has significantly raised tuition each year for the past 5 years. Perceived as a bargain 5 years ago, State is now consi
> In Problem 11, suppose passing truck drivers look to see how many trucks are waiting to be weighed at the weigh station. If they see four or more trucks in line, they will pass by the station and risk being caught and ticketed. What is the probability th
> All trucks traveling on Interstate 40 between Albuquerque and Amarillo are required to stop at a weigh station. Trucks arrive at the weigh station at a rate of 200 per 8-hour day, and the station can weigh, on the average, 220 trucks per day. a. Determin
> During registration at State University every semester, students in the college of business must have their courses approved by the college adviser. It takes the adviser an average of 2 minutes to approve each schedule, and students arrive at the adviser
> For each of the following queuing systems, indicate whether it is a single- or multiple-server model, the queue discipline, and whether its calling population is infinite or finite. a. Hair salon b. Bank c. Laundromat d. Doctor’s office e. Adviser’s offi
> A television network is attempting to decide during the summer which of the following three football games to televise on the Saturday following Thanksgiving Day: Alabama versus Auburn, Georgia versus Georgia Tech, or Army versus Navy. The estimated view
> A local real estate investor in Orlando is considering three alternative investments: a motel, a restaurant, or a theater. Profits from the motel or restaurant will be affected by the availability of gasoline and the number of tourists; profits from the
> The owner of the Columbia Construction Company must decide between building a housing development, constructing a shopping center, and leasing all the company’s equipment to another company. The profit that will result from each alterna
> Labran Jones has played for the Cleveland professional basketball team for the past eight seasons and has established himself as one of the top players in the league. He has recently become a free agent, meaning he can sign a new contract with Cleveland
> Annie Hays recently sold a condominium she had bought and lived in while she was a college student over 15 years ago. She received $150,000 for the condominium and is considering two investment alternatives. Annie can invest the entire amount in a bank m
> A young couple has $5,000 to invest in either savings bonds or a real estate deal. The expected return on each investment, given good and bad economic conditions, is shown in the following payoff table: The expected value of investing in savings bonds is
> Concerned about recent weather-related disasters, fires, and other calamities at universities around the country, university administrators at Tech have initiated several planning projects to determine how effectively local emergency facilities can handl
> The Place-Plus real estate development firm in Problem 26 is dissatisfied with the economist’s estimate of the probabilities of future interest rate movement, so it is considering having a financial consulting firm provide a report on future interest rat
> In Problem 14, the management of the Oakland Bombers is considering hiring superscout Jerry McGuire to evaluate the team’s chances for the coming season. McGuire will evaluate the team, assuming that it will sign one of the four free agents. The team’s m
> In Problem 61, the decision analysis is for automobiles and light trucks. Blue Ridge Power and Light would like to reformulate the problem for its heavy construction equipment. Emergency maintenance is much more expensive for heavy equipment, costing $15
> Blue Ridge Power and Light is an electric utility company with a large fleet of vehicles, including automobiles, light trucks, and construction equipment. The company is evaluating four alternative strategies for maintaining its vehicles at the lowest co
> Ellie Daniels has $200,000 and is considering three mutual funds for investment—a global fund, an index fund, and an Internet stock fund. During the first year of investment, Ellie estimates that there is a .70 probability that the mark
> A company must decide now which of three products to make next year to plan and order proper materials. The cost per unit of producing each product will be determined by whether a new union labor contract passes or fails. The cost per unit for each produ
> In Problem 58, determine the expected value of sample information (EVSI; i.e., the test market value) and the expected value of perfect information (EVPI).
> Kroft Food Products is attempting to decide whether it should introduce a new line of salad dressings called Special Choices. The company can test market the salad dressings in selected geographic areas or bypass the test market and introduce the product
> A car manufacturer buys fasteners such as bolts and nuts for its cars. On an average, the company buys 1 million such pairs per month. The company inspects the arriving lots and transfers the lots to its store yard. The price that Suppliers A and B charg
> Tech has three health care plans for its faculty and staff to choose from, as follows: Plan 1—monthly cost of $32, with a $500 deductible; the participants pay the first $500 of medical costs for the year; the insurer pays 90% of all re
> The U.S. Army Corps of Engineers has historically constructed dams on various rivers in the southeastern United States. Its primary instrument for evaluating and selecting among many projects under consideration is benefit–cost analysis
> Jay Seago is suing the manufacturer of his car for $3.5 million because of a defect that he believes caused him to have an accident. The accident kept him out of work for a year. The company has offered him a settlement of $700,000, of which Jay would re
> Tech is playing State in the last conference game of the season. Tech is trailing State 21 to 14, with 7 seconds left in the game, when Tech scores a touchdown. Still trailing 21 to 20, Tech can either go for 2 points and win or go for 1 point to send th
> If Suntrek, in Problem 36, wants to hire a supply chain analyst to help it determine more accurately what future logistics costs will be, what is the maximum amount they should pay the analyst?
> In Problems 10 and 23, Ann Tyler is considering hiring a financial analyst to help her determine the best investment. What is the maximum amount she should pay an analyst?
> Jeffrey Mogul is a Hollywood film producer, and he is currently evaluating a script by a new screenwriter and director, Betty Jo Thurston. Jeffrey knows that the probability of a film by a new director being a success is about .10 and that the probabilit
> Refer to Problem 43. Volkswagen considers hiring a consultant. If a consultant helps Volkswagen by giving perfect information, what is the expected value of perfect information?
> A farmer in Georgia must decide which crop to plant next year on his land: corn, peanuts, or soybeans. The return from each crop will be determined by whether a new trade bill with Russia passes the Senate. The profit the farmer will realize from each cr
> The Miramar Company in Problem 20 is considering contracting with a market research firm to do a survey to determine future market conditions. The results of the survey will indicate either positive or negative market conditions. There is a .60 probabili
> The machine shop owner in Problem 17 is considering hiring a military consultant to ascertain whether the shop will get the government contract. The consultant is a former military officer who uses various personal contacts to find out such information.
> The Americo Oil Company is considering making a bid for a shale oil development contract to be awarded by the federal government. The company has decided to bid $112 million. The company estimates that it has a 60% chance of winning the contract with thi
> James Banks was standing in line next to Robin Cole at Klecko’s Copy Center, waiting to use one of the copy machines. “Gee, Robin, I hate this,” he said. “We have to drive all the wa
> The management of First American Bank was concerned about the potential loss that might occur in the event of a physical catastrophe such as a power failure or a fire. The bank estimated that the loss from one of these incidents could be as much as $100
> Given the following sequential decision tree, determine which is the optimal investment, A or B:
> Construct a decision tree for the decision situation of Volkswagen in Problem 43 and indicate the best decision.
> The Blue Sox American League baseball team is going to enter the free-agent market over the winter to sign a new starting pitcher. They are considering five prospects who will enter the free- agent market. All five pitchers are in their mid-20s, have bee
> In Problem 40, the director of career advising at Orange Community College has paid a small fee to a local investment firm to indicate a probability for each future economic condition over the next 5 years. The firm estimates that there is a .20 probabil
> The director of career advising at Orange Community College wants to use decision analysis to provide information to help students decide which 2-year degree program they should pursue. The director has set up the following payoff table for six of the mo
> Brooke Bentley, a student in business administration, is trying to decide which management science course to take next quarter—I, II, or III. “Steamboat” Fulton, “Deathâ€&
> In Problem 14, the Bombers’ management has determined the following probabilities of the occurrence of each future season outcome for each player: Compute the expected value for each player, and indicate which player the team should try
> In Problem 37, Federated Electronics, Ltd., has hired a Washington, DC–based global trade research firm to assess the probabilities of each combination of port and government conditions for the five ports. The research firm probability
> In the “Forecasting Airport Passenger Arrivals” case problem in Chapter 15, the objective is to develop a forecasting model to predict daily airline passenger arrivals for 2-hour time segments from 4:00 A.M. to 10:00 p.M. for July at Berry International
> Federated Electronics, Ltd., manufactures display screens and monitors for computers and televisions, which it sells to companies around the world. It wants to construct a new ware- house and distribution center in Asia to serve emerging markets there. I
> Suntrek in Problem 35 estimates that the probabilities of future changes in global logistics costs are 0.09 that they will decrease, 0.27 that they will remain the same, and 0.64 that they will increase. Determine the best supplier for the company using
> Suntrek, a global apparel company, is adding a new supplier for denim fabric that it uses to manufacture denim jeans, and the suppliers it’s considering are located near the ports of Shanghai, Mumbai, Manila, Santos, and Veracruz. A maj
> Foxcomp in Problem 33 estimates that the probabilities of the severity of events in each of the countries are as follows: Determine the best decision for Foxcomp using expected value.
> Foxcomp, an electronics and computer manufacturer with a global supply chain, wants to add a new supplier for some of its component parts, and the suppliers it’s considering are in Taiwan, India, Thailand, and the Philippines. As part o
> Assume that the probabilities of demand in Problem 30 are no longer valid; the decision situation is now one without probabilities. Determine the best number of boxes of cards to stock, using the following decision criteria. a. Maximin b. Maximax c. Hurw
> The Palm Garden Greenhouse specializes in raising carnations that are sold to florists. Carnations are sold for $3.00 per dozen; the cost of growing the carnations and distributing them to the florists is $2.00 per dozen. Any carnations left at the end o
> The manager of the greeting card section of Mazey’s department store is considering her order for a particular line of Christmas cards. The cost of each box of cards is $3; each box will be sold for $5 during the Christmas season. After
> Stevie Stone, a bellhop at the Royal Sundown Hotel in Atlanta, has been offered a management position. Although accepting the offer would assure him a job if there was a recession, if good economic conditions prevailed, he would actually make less money
> The Loebuck Grocery must decide how many cases of milk to stock each week to meet demand. The probability distribution of demand during a week is shown in the following table: Each case costs the grocer $10 and sells for $12. Unsold cases are sold to a l
> Two area hospitals have jointly initiated several planning projects to determine how effectively their emergency facilities can handle disaster-related situations at nearby Tech University. These disasters could be weather related (such as a tornado), a
> The Steak and Chop Butcher Shop purchases steak from a local meatpacking house. The meat is purchased on Monday at $2.00 per pound, and the shop sells the steak for $3.00 per pound. Any steak left over at the end of the week is sold to a local zoo for $.
> Fenton and Farrah Friendly, husband-and-wife car dealers, are soon going to open a new dealership. They have three offers: from a foreign compact car company, from a U.S. producer of full-sized cars, and from a truck company. The success of each type of
> In Problem 13, the Place-Plus real estate development firm has hired an economist to assign a probability to each direction interest rates may take over the next 5 years. The economist has determined that there is a .50 probability that interest rates wi
> A global economist hired by Microcomp, the U.S.-based computer manufacturer in Problem 12, estimates that the probability that the economic and political climate overseas and in Mexico will decline during the next 5 years is .40, the probability that it
> In Problem 11, the Tech coaches have reviewed game films and have determined the following probabilities that State will use each of its defenses: a. Using expected value, rank Tech’s plays from best to worst. b. During the actual game,
> In Problem 10, Ann Tyler, with the help of a financial newsletter and some library research, has been able to assign probabilities to each of the possible interest rates during the next year, as follows: Using expected value, determine her best investmen
> An investor must decide between two alternative investments—stocks and bonds. The return for each investment, given two future economic conditions, is shown in the following payoff table: What probability for each economic condition wou
> The financial success of the Downhill Ski Resort in the Blue Ridge Mountains is dependent on the amount of snowfall during the winter months. If the snowfall averages more than 40 inches, the resort will be successful; if the snowfall is between 20 and 4
> The Miramar Company is going to introduce one of three new products: a widget, a hummer, or a nimnot. The market conditions (favorable, stable, or unfavorable) will determine the profit or loss the company realizes, as shown in the following payoff table
> The owner of the Burger Doodle Restaurant is considering two ways to expand operations: open a drive-up window or serve breakfast. The increase in profits resulting from these proposed expansions depends on whether a competitor opens a franchise down the
> Bob and Carol Packer operate a successful outdoor-wear store in Vermont called Northwoods Backpackers. They stock mostly cold weather outdoor items such as hiking and backpacking clothes, gear, and accessories. They established an excellent reputation th
> Allen Abbott has a wide-curving, uphill driveway leading to his garage. When there is a heavy snow, Allen hires a local carpenter, who shovels snow on the side in the winter, to shovel his drive- way. The snow shoveler charges $30 to shovel the driveway.
> A concessions manager at the Tech versus A&M football game must decide whether to have the vendors sell sun visors or umbrellas. There is a 30% chance of rain, a 15% chance of overcast skies, and a 55% chance of sunshine, according to the weather for
> A machine shop owner is attempting to decide whether to purchase a new drill press, a lathe, or a grinder. The return from each will be determined by whether the company succeeds in getting a government military contract. The profit or loss from each pur
> In problem 15, if the probabilities that Mill Mountain coffee house will use marketing strategies A, B, and C are 0.25, 0.45, and 0.30, respectively, compute the expected value for each of Startrak’s strategies and select the best one.
> Two coffee house chains, Startrak and Mill Mountain, dominate the Columbus market. Startrak has developed three new marketing strategies, 1, 2, and 3, for the fall season, which include various combinations of media and print advertising and promotions.
> The Oakland Bombers professional basketball team just missed making the playoffs last season and believes it needs to sign only one very good free agent to make the playoffs next season. The team is considering four players: Barry Byrd, Rayneal Oâ&
> Place-Plus, a real estate development firm, is considering several alternative development projects. These include building and leasing an office park, purchasing a parcel of land and building an office building to rent, buying and leasing a warehouse, b
> Microcomp is a U.S.-based manufacturer of personal computers. It is planning to build a new manufacturing and distribution facility in either South Korea, China, Taiwan, the Philippines, or Mexico. It will take approximately 5 years to build the necessar
> The Tech football coaching staff has six basic offensive plays it runs every game. Tech has an upcoming game against State on Saturday, and the Tech coaches know that State employs five different defenses. The coaches have estimated the number of yards T
> Ann Tyler has come into an inheritance from her grandparents. She is attempting to decide among several investment alternatives. The return after 1 year is primarily dependent on the interest rate during the next year. The rate is currently 7%, and Ann a
> The copy center at the college of business at State University has become an increasingly contentious item among the college administrators. The department heads have complained to the associate dean about the long lines and waiting times for their secre
> A farmer in Iowa is considering either leasing some extra land or investing in savings certificates at the local bank. If weather conditions are good next year, the extra land will give the farmer an excellent harvest. However, if weather conditions are
> A new county hospital is attempting to determine whether it needs to add a particular specialist to its staff. Five percent of the general hospital population in the county contracts the illness the specialist would treat. If 12 patients check into the h
> An automobile manufacturer has discovered that 20% of all the transmissions it installed in a particular style of truck 1 year are defective. It has contacted the owners of these vehicles and asked them to return their trucks to the dealer to check the t
> A polling firm is taking a survey regarding a proposed new law. Of the voters polled, 30% are in favor of the law. If 10 people are surveyed, what is the probability that four will indicate that they are opposed to the passage of the new law?
> A manufacturing company has 10 machines in continuous operation during a workday. The probability that an individual machine will break down during the day is .10. Determine the probability that during any given day three machines will break down.
> The quality control process at a manufacturing plant requires that each lot of finished units be sampled for defective items. Twenty units from each lot are inspected. If five or more defective units are found, the lot is rejected. If a lot is known to c
> Geo-net, a cellular phone company, has collected the following frequency distribution for the length of calls outside its normal customer roaming area: The sample mean (x) for this distribution is 14.3 minutes, and the sample standard deviation is 3.7 mi
> The department of management science at Tech has sampled 250 of its majors and compiled the following frequency distribution of grade point averages (on a 4.0 scale) for the previous semester: The sample mean (x) for this distribution is 2.5, and the sam
> Employees in the textile industry can be segmented as follows: a. Determine the probability of each event in this distribution. b. Are the events in this distribution mutually exclusive? Explain. c. What is the probability that an employee is male? d. Is
> The state of Virginia has implemented a Standards of Learning (SOL) test that all public school students must pass before they can graduate from high school. A passing grade is 75. Montgomery County High School administrators want to gauge how well their
> WestCom Systems Products Company develops computer systems and software products for commercial sale. Each year it considers and evaluates a number of different R&D projects to undertake. It develops a road map for each project, in the form of a
