HW13 Solutions - OSCM 230 Homework 13 Solutions HOMEWORK#13...

OSCM 230 Homework 13 Solutions
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Problem 8-28.
(a) Conduct survey. If results are favorable, build large shop. If the results are unfavorable, don't
build any shop.
(b) EVSI = $11,000. EVwPI = $35,400. Best EMV = $19,000. EVPI = $16,400. Efficiency =
67.07%.

OSCM 230 Homework 13 Solutions
8-40.
(a) See file P8-40.XLS for the TreePlan solution. Conduct the survey questionnaire. If the
response is positive, produce razor. If the response is negative, do not produce razor.
Expected return = $24,160.
(b) EVPI = $30,000. EVSI = $9,160. Efficiency = 30.53%.
(c) EVPI = $30,000. EVSI = $17,080. Efficiency = 56.93%.
Problem 8-46.
. See file P8-46.XLS for the TreePlan solution.
If the survey is not conducted, the medium facility, with an EMV of $670,000, is selected. If the
survey is conducted, we first compute the revised probabilities using Bayes’ theorem, as
follows.
Prior Probabilities
P(Low demand) = 0.15
P(Fair demand) = 0.40

OSCM 230 Homework 13 Solutions
P(High demand) = 0.45
Conditional probabilities
P(Low survey | Low demand) =
0.70
P(Fair survey | Low demand) =
0.20