Use This Information to Answer the Following Questions -Refer to the Information Above

question 52

Essay

Use this information to answer the following questions.
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.
$$\begin{array} { l c c } \text { Alternative } & \text { Bid Accepted } & \text { Bid Rejected } \\\hline \text { Buy 1 machine } & \$ 10 & \$ 5 \\\text { Buy 2 machines } & \$ 30 & \$ 4 \\\text { Buy 3 machines } & \$ 40 & \$ 2\end{array}$$
-Refer to the information above.
a.Which alternative should be chosen based on the maximax criterion?
b.Which alternative should be chosen based on the maximin criterion?
c.Which alternative should be chosen based on the Lapalce criterion?
d.Which alternative should be chosen based on criterion of realism with alpha = 0.8?
e.Which alternative should be chosen based on the minimax regret criterion?

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Definitions:

Materials Purchases

The acquisition of raw materials or supplies required for the production of goods or provision of services.

Payment Discount

A reduction in the invoice amount offered by a seller to the buyer in return for early payment within a specified time frame.

Cash Balance

The amount of cash on hand or in bank accounts, immediately available to a business or individual.

Cash Disbursements

Money paid out by a business in the course of its operations, such as paying for expenses, purchasing assets, or repaying loans.