Alternatives 1 and 2 in the Following Payoff Table Represent

question 79

Multiple Choice

Alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt. The level of demand affects the success of both strategies. The states of nature (S_I) represent the levels of demand for the company products. S₁, S₂, and S₃ characterize high, medium, and low demand, with probabilities of .3, .6, and .1, respectively. The payoff values are in thousands of dollars. The management believes that weather conditions significantly affect the level of demand. 48 monthly sales reports are randomly selected. These monthly sales reports show 15 months with high demand, 28 months with medium demand, and 5 months with low demand. 12 of the 15 months with high demand had favorable weather conditions. 14 of the 28 months with medium demand had favorable weather conditions. Only 1 of the 5 months with low demand had favorable weather conditions. What is the probability that weather conditions are poor, given that the demand is high?

• A) .2
• B) .5
• C) .8
• D) .25
• E) .75

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Definitions:

Pump Division

A specific sector or unit within a company that focuses on the production or sale of pumps.

Pool Products Division

A specialized business unit within a company that focuses on the development, manufacture, and distribution of products for pools, including chemicals, pumps, and accessories.

Service Departments

Units within an organization that support the production process but do not directly engage in manufacturing activities.

Operating Departments

Operating departments are units within an organization directly involved in its primary revenue-generating activities, such as production or sales departments.