XYZ Is a Paint Product Manufacturer,and One of the Plants $\quad$

question 91

Multiple Choice

XYZ is a paint product manufacturer,and one of the plants is experiencing a substantial increase in demand.The future demand for the products could be low,medium,or high,with probabilities estimated to be 25%,50%,and 30%,respectively.The company wants to determine the financial impact associated with the three decision alternatives under the varying levels of demand.Given the following payoff matrix,compute the expected regret for the option of subcontracting additional capacity. $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Demand }$

$\begin{array} { | c | c | c | c | } \hline \text { Decision Aternative } & \text { Low } ( 20 \% ) & \text { Medium } ( 50 \% ) & \text { High (30\%) } \\\hline \begin{array} { c } \text { Subcontract additional } \\\text { capacity }\end{array} & \$ 7 \text { million } & \$ 40 \text { million } & \$ 70 \text { m illion } \\\hline \text { Build a new plant } & - \$ 55 \text { million } & \$ 25 \text { million } & \$ 100 \text { million } \\\hline \text { Do nothing } & \$ 15 \text { million } & \$ 30 \mathrm {~m} \text { illion } & \$ 85 \text { million } \\\hline\end{array}$

• A)$10.6 M
• B)$21.5 M
• C)$9.5 M
• D)$14 M

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Definitions:

Current Government Expenditures

The total spending by a government on goods, services, and debt interest within a given fiscal period, excluding capital expenditure.

Social Security Beneficiary

A person who receives benefits from the Social Security program, which typically includes retirees, disabled workers, and their families.

Workers Per Beneficiary

The ratio of active employees contributing to a system (like Social Security) to the number of recipients receiving benefits.