Case 1. A company must decide now which of three products to make next year to p - StudyAce – Custom Writing & Research Support for All Levels

Case 1.

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 product, given each contract result, is shown in the following payoff table:

Table 1.Payoff table for case 1.

	Contract Outcome
Product	Pass (S₁)	Fail (S₂)
1(d₁)	$7.50	$6.00
2(d₂)	4.00	7.00
3(d₃)	6.50	3.00

Note that this payoff table is for costs. This is minimization problem. Determine which product should be produced, using the following decision criteria.

1)use the optimistic approach

Question 1 options:

	select d3
	select d1
	select d2
	non of these alternatives is correct

case 1(continued)

use conservative approach

Question 2 options:

	select d1
	select d2
	select d3
	non of these alternatives is correct

case 1(continued)

use minimax regret approach

Question 3 options:

	select d2
	select d3
	select d1
	none of these alternatives is correct

case 1 (continued)

Suppose that the probabilities that a new union labor contract passes (s₁) is 0.7 andthe probabilities that a new union labor contract fails (s₂) is 0.3. What option should a company choose using the expected value approach?

Question 4 options:

	select d2
	select d1
	select d3
	non of these alternatives is correct

case 1(continued)

Compute EV(d₁)

Question 5 options:

	7.05
	4.90
	5.45
	Non of these alternatives is correct

Case1(continued)

Compute EV(d2)

Question 6 options:

	7.05
	5.45
	4.90
	non of these alternatives is correct

case 1(continued)

Which equation we should use to compute

Expected Value of Perfect Information (EVPI)

Question 7 options:

	EVPI (EV of PI) = abs(EV with PI – EV of our optimal decision)=abs(EVwPI-EVwoPI)
	EVPI=EVwPI-EVwoPI
	EVPI=EVwSI-EVwoSI
	non of these alternatives is correct

case 1 (continued)

Let’s compute EV with PI (EVwPI)

Question 8 options:

	3.7
	2.2
	1.4
	non of these alternatives is correct

case 1(continued)

Compute EVPI

Question 9 options:

	-4.9
	-2.1
	1.2
	non of these alternative is correct

Case 2.

RAP Computers assembles personal computers from generic parts it purchases at discount, and it sells the units by phone orders it receives from customers responding to the company’s ads in trade journals. Actual demand for the company’s computers for the past 6 month is shown in the table below.

Table 2. Actual demand for the company’s computers for the past 6 month

#	Month	Demand
1	March	120
2	April	110
3	May	150
4	June	130
5	July	160
6	August	165

Determine

a three-month moving average forecast for next month (September).

Question 10 options:

	151.667
	149
	162
	150

Case 2 (continued)

Determine

a five-month moving average forecast for next month (September).

Question 11 options:

	152
	143
	151.6
	151.7

case 2(continued)

Compute a weighted three-month average forecast for the next month (September). Assign weights of .55, .33, and .12 to the months in sequence, starting with the most recent month.

Question 12 options:

	151.7
	151.6
	143
	159.15

Case 2 (continued)

Determine the simple exponential smoothing forecast for next Month (September) using α = .4

Question 13 options:

	151.1136≈151
	143
	151.6
	159.15

Table 3 -month moving average forecast

#	Month	Demand	Forecast	abs(D_t-F_t)	(D_t-F_t)²
1	March	120
2	April	110
3	May	150
4	June	130	126.667	3.333333	11.1111
5	July	160	130	30	900
6	August	165	146.667	18.33333	336.111
				Sum	Sum
				51.66667	1247.22

case 2(continued)

Measure the accuracy of the three -month moving average forecast by using MAD. (Use table 3 from Excel).

Question 14 options:

	MAD is 51.66/3=17.222222
	MAD is 51.66/6=8.61
	MAD is 51.66/5=10.332
	MAD is 51.66/455=0.11

case 2(continued)

Measure the accuracy of the three -month moving average forecast by using MAPD. (Use table 3 from Excel).

Table 3 ( 3-month moving average forecast)

#	Month	Demand	Forecast	abs(D_t-F_t)	(D_t-F_t)²
1	March	120
2	April	110
3	May	150
4	June	130	126.667	3.333333	11.1111
5	July	160	130	30	900
6	August	165	146.667	18.33333	336.111
				Sum	Sum
				51.66667	1247.22

Question 15 options:

	MAPD is 51.66/3*100%=172.2%
	MAPD is 51.66/835*100%=6.2%
	MAPD is 51.66/455*100%=11.36%
	MAPD is 51.66/6*100%=861%

case 2(continued)

Measure the accuracy of the three -month moving average forecast by using MSE. (Use table 3. From Excel).

Table 3.( 3-month moving average forecast)

#	Month	Demand	Forecast	abs(D_t-F_t)	(D_t-F_t)²
1	March	120
2	April	110
3	May	150
4	June	130	126.667	3.333333	11.1111
5	July	160	130	30	900
6	August	165	146.667	18.33333	336.111
				Sum	Sum
				51.66667	1247.22

Question 16 options:

	MSE is 1247.22/3≈415.74
	MSE is 1247.22/6=207.87
	MSE is 1247.22/455=2.74
	1247.22/835=1.5

Case 2 (continued)

Measure the accuracy of the weighted three-month average forecast by using MAD. Use table 4.

Table 4. Weighted three-month average forecast (0.55,.33,.12)

#	Month	Demand	Forecast	ABS(D_t-F_t)	(D_t-F_t)²
1	March	120
2	April	110
3	May	150
4	June	130	133.2	3.2	10.24
5	July	160	134.2	25.8	665.64
6	August	165	148.9	16.1	259.21
		SUM		SUM	SUM
		455		45.1	935.09

MAD=45.1/3=15.03(3)

Question 17 options:

	MAD=45.1/3=15.03(3)
	MAD=45.1/6=7.51
	MAD=45.1/455=0.0991
	non of these alternative is correct

Measure the accuracy of the weighted three-month average forecast by using

MAPD. Use table 4.

Table 4. Weighted three-month average forecast (0.55,.33,.12)

#	Month	Demand	Forecast	ABS(D_t-F_t)	(D_t-F_t)²
1	March	120
2	April	110
3	May	150
4	June	130	133.2	3.2	10.24
5	July	160	134.2	25.8	665.64
6	August	165	148.9	16.1	259.21
		SUM		SUM	SUM
		455		45.1	935.09

Question 18 options:

	MAPD=45.1/835*100%=5.4%
	MAPD=45.1/455*100%=9.91%
	MAPD=45.1/3=15.03
	MAPD=45.1/6=7.52

case 2 (continued)

Measure the accuracy of the weighted three-month average forecast by using MSE. Use table 4.

Table 4. Weighted three-month average forecast (0.55,.33,.12)

#	Month	Demand	Forecast	ABS(D_t-F_t)	(D_t-F_t)²
1	March	120
2	April	110
3	May	150
4	June	130	133.2	3.2	10.24
5	July	160	134.2	25.8	665.64
6	August	165	148.9	16.1	259.21
		SUM		SUM	SUM
		455		45.1	935.09

Question 19 options:

	MSE=935.09/3≈311.697
	MSE=935.09/6=155.85
	MSE=45.1/455*100%=9.91%
	MSE=45.1/3=15.03(3)

Based on your measure the accuracy of the three-month average forecast and the weighted three-month average forecast which of the forecasting methods would you want to rely upon to forecast demand for September?

Question 20 options:

	I would prefer the 3-month weighted moving average forecasting method as it has the lowest MAD, lowest MAPD, and lowest MSE.
	I would prefer the 3-month moving average forecasting method as it has the lowest MAD, lowest MAPD, and lowest MSE.
	I would prefer both of them because they have the same MAD, MAPD, and MSE.
	non of these alternatives is correct

Case 1. A company must decide now which of three products to make next year to p