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    Quiz 1

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    Waleed Bin Khalid
    Yankee Industries must decide whether to manufacture a new component in-house or purchase it from a supplier. Doing market research first could predict if demand will be high, medium, or low. The document provides payoff tables and probabilities with and without market research. It asks to determine the best decision strategy, including whether market research should be conducted given it costs $10,000.

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    Download as XLSX, PDF, TXT or read online from Scribd

    Quiz 1

    Uploaded by

    Waleed Bin Khalid
    115 views4 pages
    Yankee Industries must decide whether to manufacture a new component in-house or purchase it from a supplier. Doing market research first could predict if demand will be high, medium, or low. The document provides payoff tables and probabilities with and without market research. It asks to determine the best decision strategy, including whether market research should be conducted given it costs $10,000.

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    Quiz 1.xlsx

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    Yankee Industries must decide whether to manufacture a new component in-house or purchase it from a supplier. Doing market research first could predict if demand will be high, medium, or low. The document provides payoff tables and probabilities with and without market research. It asks to determine the best decision strategy, including whether market research should be conducted given it costs $10,000.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    115 views4 pages

    Quiz 1

    Uploaded by

    Waleed Bin Khalid
    Yankee Industries must decide whether to manufacture a new component in-house or purchase it from a supplier. Doing market research first could predict if demand will be high, medium, or low. The document provides payoff tables and probabilities with and without market research. It asks to determine the best decision strategy, including whether market research should be conducted given it costs $10,000.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 4

    Yankee Industries - Make or Buy Decision

    Yankee Industries must decide wether to "manufacture" a new component at its factory or "purchase" from
    Research". In the absence of market research, if the demnd is high enough, it will be more profitable to manuf
    than purchase it. However, make or buy decision must be made befor demand level is known. The projected pro
    payoff table.

    Payoff Table

    State of Nature (Chance Events)


    Alternatives High Demand (H) Medium Demand (M)
    Manufacture 200 60
    Purchase 140 80
    Probabilities 0.3 0.4

    Yankee Industries can decide to go for "Market Research" before making a decision for make or buy (the very fi
    research is done, it will predict either a favorable market condition (F) or unfavorable market condition (U). Foll

    Probability of Favorable Market Condition P (F) 0.40


    Probability of Unfavorable Market Condition P (U) 0.60

    Probability of High Demand Given Favorable Market Condition P (H│F) 0.45


    Probability of Medium Demand Given Favorable Market Condition P (M│F) 0.40
    Probability of Low Demand Given Favorable Market Condition P (L│F) 0.15

    Probability of High Demand Given Unfavorable Market Condition P (H│U) 0.20


    Probability of Medium Demand Given Unfavorable Market Condition P (M│U) 0.40
    Probability of Low Demand Given Unfavorable Market Condition P (L│U) 0.40
    Suppose the market research is expected to cost $10,000. Determine the best decision strategy including whe
    conducted.
    Good Luck!!!
    Buy Decision

    ory or "purchase" from a supplier with and without "Market


    ore profitable to manufacture the component in-house rather
    nown. The projected profits (1000's of $) are given below in the

    Low Demand (L)


    -30
    20
    0.3

    make or buy (the very first choice to make). Now, if the market
    arket condition (U). Following gives the relevant probabilities,
    n strategy including whether the market research should be

    Good Luck!!!

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