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GBA440 midterm exam latest 2018

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Question Question 1. A plant manager is considering buying additional stamping machines to accommodate increasing demand. The alternatives are to buy 1 machine, 2 machines, or 3 machines. The profits realized under each alternative are a function of whether their bid for a recent defense contract i...

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  • May 15, 2018
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  • 2017/2018
  • Exam (elaborations)
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GBA440 midterm exam latest 2018



Question

Question 1. A plant manager is considering buying additional stamping machines to

accommodate increasing demand. The alternatives are to buy 1 machine, 2 machines, or 3

machines. The profits realized under each alternative are a function of whether their bid for a

recent defense contract is accepted or not. The payoff table below illustrates the profits realized

(in $000's) based on the different scenarios faced by the manager.

Alternative Bid Accepted Bid Rejected
Buy 1 machine $10 $5
Buy 2 machine $30 $4
Buy 3 machine $40 $2
Using the information above, which alternative should be chosen based on the maximax

criterion?

Buy 1 machine

Buy 2 machines

Buy 3 machines

Question 2. A plant manager is considering buying additional stamping machines to

accommodate increasing demand. The alternatives are to buy 1 machine, 2 machines, or 3

machines. The profits realized under each alternative are a function of whether their bid for a

recent defense contract is accepted or not. The payoff table below illustrates the profits realized

(in $000's) based on the different scenarios faced by the manager.

Alternative Bid Accepted Bid Rejected

Buy 1 machine $10 $5

Buy 2 machines $30 $4

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