Consider the Following Payoff Table in Which D1 Through D4

question 15

Multiple Choice

Consider the following payoff table in which D1 through D4 represent decisions, S1 through S4 represent states of nature, and the values in the cells represent profits. $\begin{array}{c}\begin{array}{c}\\ \text { D1 } &\\ \text {D2 } &\\ \text {D3} &\\ \text {D4} &\\\end{array}\begin{array}{|c|c|c|c|}\hline \text { S1 } & \text { S2 } & \text { S3 } & \text { S4 } \\\hline-20 & 40 & 60 & 100 \\\hline 30 & 120 & 60 & -50 \\\hline 30 & 30 & 40 & 40 \\\hline 10 & -60 & 80 & 70 \\\hline\end{array}\end{array}$
The optimal decision under the maximax criterion is:

• A)D1
• B)D2
• C)D3
• D)D4

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Definitions:

Finished Goods Inventory

Finished products on hand that are prepared for sale, yet remain unpurchased by buyers.

Total Manufacturing Costs

The aggregate amount of costs incurred in the process of producing goods, including direct materials, direct labor, and manufacturing overhead.

Work in Process Inventory

Items undergoing production that are not fully complete but are part way through the manufacturing process.

Overhead Applied

The allocation of overhead costs to specific products or production jobs based on a predetermined overhead rate.