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Camm, et al - Business Analytics 4/e (Homework)

James Finch

Economics, section 1, Fall 2019

Instructor: Dr. Friendly

Current Score : 27 / 77

Due : Sunday, January 27, 2030 00:00 EST

Last Saved : n/a Saving...  ()

Question
Points
1 2 3 4 5 6 7 8 9 10
5/6 0/2 1/9 12/13 1/1 1/6 6/9 0/7 1/12 –/12
Total
27/77 (35.1%)
  • Instructions

    Camm/Cochran/Fry/Ohlmann's best-selling Business Analytics, 4th Edition, published by Cengage Learning, covers the full range of analytics, from descriptive and predictive to prescriptive analytics. Step-by-step instructions demonstrate how to use Excel, Tableau, R, and JMP Pro for more advanced analytics concepts. You have the freedom to select your preferred method for teaching concepts using any of today's software choices. Extensive solutions to problems and cases save significant grading time while allowing you to ensure students are mastering the material. In addition, an all new WebAssign online course management system will allow you to customize material while strengthening each student's understanding of the concepts.

    Question 1 features multiple question types and guides students through the process of interpreting values.

    Question 2 links to an Excel data file.

    Question 3 contains links to instructions for using R and uses grading that is consistent with R output.

    Question 4 utilizes special grading to accept a simple linear regression model and guides students through a hypothesis test of the regression parameters.

    Question 5 is representative of a test bank question offered.

    Question 6 contains a Master It.

    Question 7 features grading for a mathematical model and an answer blank format that mimics an Excel spreadsheet.

    Question 8 exemplifies use of a simulation model run in Excel. Subsequent confidence intervals are then graded based on the values from their simulation. The solution, which can be visible after students submit responses, displays an Excel spreadsheet and the necessary formulas and instructions needed to run the simulation.

    Question 9 allows students to input the appropriate objective function and constraints for a linear programming question and accepts alternative optima as an ordered list.

    Question 10 demonstrates how answer blanks can be overlaid onto an image for a seamless experience that mimics textbook presentation. This demo assignment allows many submissions and allows you to try another version of the same question for practice wherever the problem has randomized values.

    The answer key and solutions will display after the first submission for demonstration purposes. Instructors can configure these to display after the due date or after a specified number of submissions.

Assignment Submission

For this assignment, you submit answers by question parts. The number of submissions remaining for each question part only changes if you submit or change the answer.

Assignment Scoring

Your last submission is used for your score.

1. 5/6 points  |  Previous Answers CammBA4 2.E.024. My Notes
Question Part
Points
Submissions Used
1 2 3 4 5 6
1/1 1/1 1/1 0/1 1/1 1/1
1/100 1/100 3/100 3/100 2/100 1/100
Total
5/6
 
Five observations taken for two variables follow.
xi
4 6 11 3 16
yi
50 60 40 70 20
(a)
Develop a scatter chart with x on the horizontal axis.

Correct: Your answer is correct.
(b)
What does the scatter chart developed in part (a) indicate about the relationship between the two variables?
The scatter chart indicates that there is Correct: Your answer is correct. seenKey

a negative

relationship between the two variables.
(c)
Compute the sample covariance.
Correct: Your answer is correct. seenKey

-97.5

Based on the sample covariance, what can be said about the relationship between the two variables?
     Incorrect: Your answer is incorrect.
(d)
Compute the sample correlation coefficient. (Round your answer to three decimal places.)
Correct: Your answer is correct. seenKey

-0.933

Based on the sample correlation coefficient, what can be said about the relationship between the two variables?
     Correct: Your answer is correct.


Solution or Explanation
Note: We are displaying rounded intermediate values for practical purposes. However, the calculations are made using the unrounded values.
(a)
A scatter chart has a horizontal axis labeled "x" with values from 0 to 20 and a vertical axis labeled "y" with values from 0 to 80. The scatter chart has 5 points. A pattern goes down and right from (3, 70) to (16, 20).
(b)
negative relationship
(c/d)
Spreadsheet Solution
A B C D E F
1 x y xi x yi y (xi x)(yi y)
2 4 50 4 2 8
3 6 60 2 12 24
4 11 40 3 8 24
5 3 70 5 22 110
6 16 20 8 28 224
7
8 x = 8
9 y = 48
10
11 sxy = 97.5
12 Covariance: 97.5
13
14 sx = 5.431
15 sy = 19.235
16
17 rxy = 0.933
18 Correlation
Coefficient:
0.933
19
Formulas
A B C D E F
1 x y xi x yi y (xi x)(yi y)
2 4 50 =A2$B$8 =B2$B$9 =C2*D2
3 6 60 =A3$B$8 =B3$B$9 =C3*D3
4 11 40 =A4$B$8 =B4$B$9 =C4*D4
5 3 70 =A5$B$8 =B5$B$9 =C5*D5
6 16 20 =A6$B$8 =B6$B$9 =C6*D6
7
8 x = =AVERAGE(A2:A6)
9 y = =AVERAGE(B2:B6)
10
11 sxy = =SUM(E2:E6)/4
12 Covariance: =COVARIANCE.S(A2:A6,B2:B6)
13
14 sx = =STDEV.S(A2:A6)
15 sy = =STDEV.S(B2:B6)
16
17 rxy = =B11/(B14*B15)
18 Correlation
Coefficient:
=CORREL(A2:A6,B2:B6)
19
The negative value of the covariance suggests a negative linear relationship between the two variables. Because the value of the covariance depends on the units of measurement for x and y, it cannot be used to measure the strength of the linear relationship between the two variables. The sample correlation coefficient is not affected by the units of measurement therefore r = 0.933 indicates that there is a strong negative linear relationship between the two variables.
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2. 0/2 points  |  Previous Answers CammBA4 3.E.015.alt. My Notes
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1 2
0/1 0/1
4/100 3/100
Total
0/2
 
DATAfile: NewAuto
An automotive company is considering the introduction of a new model of sports car that will be available in four-cylinder and six-cylinder engine types. A sample of customers who were interested in this new model were asked to indicate their preference for an engine type for the new model of automobile. The customers were also asked to indicate their preference for exterior color from four choices: red, black, green, and white. Consider the following data regarding the customer responses.
Four Cylinders Six Cylinders
Red 143 857
Black 200 800
Green 321 679
White 420 580
(a)
Construct a clustered-column chart with exterior color as the horizontal variable.

(b)
What can we infer from the clustered-column chart in part (a)? (Select all that apply.)

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3. 1/9 points  |  Previous Answers CammBA4 5.E.013.R. My Notes
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Submissions Used
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/1 /1 /1 /1 /1 /1 0/1 1/1 0/1
0/100 0/100 0/100 0/100 0/100 0/100 1/100 1/100 1/100
Total
1/9
 
DATAFile: FBS
Refer to the R and JMP appendices in the MindTap Reader for supplemental instructions.
The Football Bowl Subdivision (FBS) level of the National Collegiate Athletic Association (NCAA) consists of over 100 schools. Most of these schools belong to one of several conferences, or collections of schools, that compete with each other on a regular basis in collegiate sports. Suppose the NCAA has commissioned a study that will propose the formation of conferences based on the similarities of the constituent schools. The file FBS contains data on schools that belong to the Football Bowl Subdivision. Each row in this file contains information on a school. The variables include football stadium capacity, latitude, longitude, athletic department revenue, endowment, and undergraduate enrollment.
Using Rattle: On the Data tab, deselect the check box next to Partition, select the Input type for the StadiumCapacity, Longitude, Latitude, Endowment...000., and Enrollment variables, and select the Ignore type for School and AthleticRevenue variables. To normalize the variables (part (a) only), on the Transform tab, select Rescale for Type: and Recenter for Normalize:, then select the StadiumCapacity, Longitude, Latitude, Endowment...000., and Enrollment variables. To perform the k-means clustering, on the Cluster tab, select KMeans in the Type: row, enter the desired number of clusters in the Clusters: box, enter 42 in the Seed: box, and enter 1,000 in the Runs: box. Make sure to deselect the check box for Re-Scale.
(a)
Apply k-means clustering with
k = 10
using football stadium capacity, latitude, longitude, endowment, and enrollment as variables. Normalize the input variables to adjust for the different magnitudes of the variables. Analyze the resultant clusters.
What is the smallest cluster size?
How many smallest clusters are there?
What is the least dense cluster (as measured by the average distance in the cluster)? (Round your average distance to three decimal places.)
The least dense cluster is a cluster of size with an average distance in the cluster of , based on normalized variables.
What makes the least dense cluster so diverse?
    
(b)
What problems do you see with the plan for defining the school membership of the 10 conferences directly with the 10 clusters?
    
(c)
Repeat part (a), but this time do not normalize the values of the input variables. Analyze the resultant clusters.
How and why do they differ from those in part (a)?
The sizes of the clusters vary widely when compared to the clusters in part (a) because when variables are not normalized, the formation of clusters is dominated by the variable on the scale.
Identify the dominating factor(s) in the formation of these new clusters. (Select all that apply.)

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4. 12/13 points  |  Previous Answers CammBA4 7.E.003. My Notes
Question Part
Points
Submissions Used
1 2 3 4 5 6 7 8 9 10 11 12 13
1/1 1/1 1/1 1/1 1/1 1/1 1/1 0/1 1/1 1/1 1/1 1/1 1/1
1/100 2/100 1/100 1/100 1/100 1/100 1/100 1/100 1/100 2/100 2/100 2/100 1/100
Total
12/13
 
DATAfile: Jensen
Jensen Tire & Auto is deciding whether to purchase a maintenance contract for its new computer wheel alignment and balancing machine. Managers feel that maintenance expense should be related to usage, and they collected the following information on weekly usage (hours) and annual maintenance expense (in hundreds of dollars).
Weekly Usage
(hours)
Annual
Maintenance
Expense
13 17.0
10 22.0
20 30.0
28 37.0
32 47.0
17 30.5
24 32.5
31 39.0
40 51.5
38 40.0
(a)
Develop a scatter chart with weekly usage hours as the independent variable. What does the scatter chart indicate about the relationship between weekly usage and annual maintenance expense (in hundreds of dollars)?
     Correct: Your answer is correct.
(b)
Use the data to develop an estimated regression equation that could be used to predict the annual maintenance expense in hundreds of dollars (y) for a given number of hours of weekly usage (x). What is the estimated regression model? (Round your numerical values to four decimal places.)
ŷ =
.9534x+10.528
Correct: Your answer is correct. webMathematica generated answer key
(c)
Test whether the regression parameter β0 is equal to zero at a 0.05 level of significance.
Find the p-value. (Round your answer to four decimal places.)
p-value = Correct: Your answer is correct. seenKey

0.0228

State your conclusion.
     Correct: Your answer is correct.
Test whether the regression parameter β1 is equal to zero at a 0.05 level of significance. (Use the t test.)
Find the p-value. (Round your answer to four decimal places.)
p-value = Correct: Your answer is correct. seenKey

0.0001

State your conclusion.
     Correct: Your answer is correct.
What are the correct interpretations of the estimated regression parameters?
     Correct: Your answer is correct.
Are these interpretations reasonable?
The interpretation of β0 Incorrect: Your answer is incorrect. seenKey

is not

reasonable and the interpretation of β1 Correct: Your answer is correct. seenKey

is

reasonable.
(d)
How much of the variation in the sample values of annual maintenance expense (in %) does the model you estimated in part (b) explain? (Round your answer to one decimal place.)
Correct: Your answer is correct. seenKey

85.6

%
(e)
If the maintenance contract costs $3,300 per year, would you recommend purchasing it? Why or why not? (Round your answers to two decimal places.)
The mean weekly usage in our sample is 25.3 hours per week. The expected expense of a machine being used 25.3 hours per week is $ Correct: Your answer is correct. seenKey

34.65

hundred. Since this expected expense is than the cost of the maintenance contract, the maintenance contract Correct: Your answer is correct. seenKey

is

advisable.
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5. 1/1 points  |  Previous Answers CammBA4 7.TB.015. My Notes
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1/1
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1/1
 
What is the difference between the observed value of the dependent variable and the value predicted using the estimated regression equation?
     Correct: Your answer is correct.
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6. 1/6 points  |  Previous Answers CammBA4 8.E.011.MI. My Notes
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0/1 1/1 /1 /1 0/1 /1
2/100 2/100 0/100 0/100 1/100 0/100
Total
1/6
 
For a certain company, the monthly percentages of all shipments received on time over the past 12 months are 80, 82, 84, 83, 84, 84, 85, 85, 82, 83, 85, and 83.
(a)
Construct a time series plot.

What type of pattern exists in the data?
     Correct: Your answer is correct.
(b)
Compare a three-month moving average forecast with the exponential smoothing forecast for
α = 0.3.
Compute the MSE for the three-month moving forecast. (Round your answer to two decimal places.)
Compute the MSE for the exponential smoothing forecast for α = 0.3. (Round your answer to two decimal places.)
Which provides more accurate forecasts using MSE as the measure of forecast accuracy?
     Incorrect: Your answer is incorrect.
(c)
Using the more accurate forecast, what is the forecast for the next month? (Round your answer to two decimal places.)

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7. 6/9 points  |  Previous Answers CammBA4 10.E.001. My Notes
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Submissions Used
1 2 3 4 5 6 7 8 9
0/1 0/1 1/1 1/1 1/1 1/1 1/1 1/1 0/1
2/100 1/100 1/100 1/100 1/100 1/100 1/100 1/100 1/100
Total
6/9
 
Cox Electric makes electronic components and has estimated the following for a new design of one of its products.
  • Fixed Cost = $11,000
  • Material Cost per Unit = $0.17
  • Labor Cost per Unit = $0.12
  • Revenue per Unit = $0.68
Note that fixed cost is incurred regardless of the amount produced. Per-unit material and labor cost together make up the variable cost per unit. Assuming that Cox Electric sells all that it produces, profit is calculated by subtracting the fixed cost and total variable cost from total revenue.
(a)
Build an influence diagram that illustrates how to calculate profit.

(b)
Using mathematical notation similar to that used for Nowlin Plastics, give a mathematical model for calculating profit. (Write your answer in terms of the following variables q = Production Volume (quantity produced), R = Revenue Per Unit, FC = the Fixed Costs of Production, MC = Material Cost per Unit, LC = Labor Cost per Unit, and P(q) = Total Profit for producing (and selling) q units.)
P(q) =
h·LC
(c)
Implement your model from part (b) in Excel using the principles of good spreadsheet design.
A B C
1 Cox Electric Breakeven Analysis
2
3 Parameters
4 Revenue per Unit $0.68
5 Fixed Costs $11,000.00
6 Materials Cost per Unit $0.17
7 Labor Cost per Unit $0.12
8
9
10 Model
11 Production Volume
12
13 Total Revenue
14
15 Materials Cost
16 Labor Cost
17 Fixed Cost
18 Total Cost
19
20 Profit
21
(d)
If Cox Electric makes 14,000 units of the new product, what is the resulting profit (in dollars)?
$
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8. 0/7 points  |  Previous Answers CammBA4 11.E.004. My Notes
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0/1 0/1 0/1 0/1 0/1 /1 /1
1/100 2/100 1/100 1/100 1/100 0/100 0/100
Total
0/7
 
The management of Brinkley Corporation is interested in using simulation to estimate the profit per unit for a new product. The selling price for the product will be $45 per unit. Probability distributions for the purchase cost, the labor cost, and the transportation cost are estimated as follows.
Procurement
Cost ($)
Probability Labor
Cost ($)
Probability Transportation Cost ($) Probability
10 0.25 20 0.10 3 0.75
11 0.40 22 0.20 5 0.25
12 0.35 24 0.40
25 0.30
(a)
Construct a simulation model to estimate the average profit (in $) per unit and the variance of the profit per unit. (Use at least 1,000 trials. Round your answer to two decimal places.)
average $ Incorrect: Your answer is incorrect. seenKey

6.90

variance Incorrect: Your answer is incorrect. seenKey

3.79

What is a 95% confidence interval (in $) around this average? (Round your answers to two decimal places.)
$ Incorrect: Your answer is incorrect. seenKey

6.78

to $ Incorrect: Your answer is incorrect. seenKey

7.02

(b)
Management believes that the project may not be sustainable if the profit per unit is less than $5. Use simulation to estimate the probability that the profit per unit will be less than $5. (Use at least 1,000 trials. Round your answer to three decimal places.)
Incorrect: Your answer is incorrect. seenKey

0.091

What is a 95% confidence interval around this proportion? (Round your answers to three decimal places.)
to
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9. 1/12 points  |  Previous Answers CammBA4 12.E.008. My Notes
Question Part
Points
Submissions Used
1 2 3 4 5 6 7 8 9 10 11 12
0/1 0/1 1/1 0/1 0/1 0/1 0/1 0/1 0/1 0/1 0/1 0/1
1/100 1/100 2/100 1/100 1/100 1/100 1/100 1/100 1/100 1/100 1/100 1/100
Total
1/12
 
Photon Technologies, Inc., a manufacturer of batteries for mobile phones, signed a contract with a large electronics manufacturer to produce three models of lithium-ion battery packs for a new line of phones. The contract calls for the following.
Battery Pack Production Quantity
PT-100 201,000
PT-200 102,000
PT-300 148,000
Photon Technologies can manufacture the battery packs at manufacturing plants located in the Philippines and Mexico. The unit cost of the battery packs differs at the two plants because of differences in production equipment and wage rates. The unit costs for each battery pack at each manufacturing plant are as follows.
Product Philippines Mexico
PT-100 $0.95 $0.98
PT-200 $0.98 $1.06
PT-300 $1.34 $1.15
The PT-100 and PT-200 battery packs are produced using similar production equipment available at both plants. However, each plant has a limited capacity for the total number of PT-100 and PT-200 battery packs produced. The combined PT-100 and PT-200 production capacities are 175,000 units at the Philippines plant and 160,000 units at the Mexico plant. The PT-300 production capacities are 75,000 units at the Philippines plant and 100,000 units at the Mexico plant. The cost of shipping from the Philippines plant is $0.18 per unit, and the cost of shipping from the Mexico plant is $0.10 per unit.
(a)
Develop a linear program that Photon Technologies can use to determine how many units of each battery pack to produce at each plant to minimize the total production and shipping cost (in dollars) associated with the new contract. (Assume P1 = number of PT-100 battery packs produced at the Philippines plant, P2 = number of PT-200 battery packs produced at the Philippines plant, P3 = number of PT-300 battery packs produced at the Philippines plant, M1 = number of PT-100 battery packs produced at the Mexico plant, M2 = number of PT-200 battery packs produced at the Mexico plant, M3 = number of PT-300 battery packs produced at the Mexico plant.)
Min
0
Incorrect: Your answer is incorrect. webMathematica generated answer key
s.t. PT-100 Production
P1+M1201,000
Incorrect: Your answer is incorrect. webMathematica generated answer key
PT-200 Production
M2+P2=102000
Correct: Your answer is correct. webMathematica generated answer key
PT-300 Production
0
Incorrect: Your answer is incorrect. webMathematica generated answer key
Combined PT-100 and PT-200 Production Mexico Plant
0
Incorrect: Your answer is incorrect. webMathematica generated answer key
Combined PT-100 and PT-200 Production Philippines Plant
0
Incorrect: Your answer is incorrect. webMathematica generated answer key
PT-300 Production Mexico Plant
0
Incorrect: Your answer is incorrect. webMathematica generated answer key
PT-300 Production Philippines Plant
0
Incorrect: Your answer is incorrect. webMathematica generated answer key
M1, M2, M3, P1, P2, P3 0
(b)
Solve the linear program developed in part (a) to determine the optimal production plan.
(M1, M2, M3, P1, P2, P3) = 
0
Incorrect: Your answer is incorrect. webMathematica generated answer key
What is total cost of the production plan (in dollars). (Round your answer to the nearest dollar.)
$ Incorrect: Your answer is incorrect. seenKey

535,410

(c)
Use sensitivity analysis to determine how much the production and/or shipping cost per unit (in dollars per unit) would have to change to produce additional units of the PT-100 in the Philippines plant.
It would have to decrease by more than $ Incorrect: Your answer is incorrect. seenKey

0.05

per unit.
(d)
Use sensitivity analysis to determine how much the production and/or shipping cost per unit (in dollars per unit) would have to change to produce additional units of the PT-200 in the Mexico plant.
It would have to decrease by more than $ Incorrect: Your answer is incorrect. seenKey

0.05

per unit.


Solution or Explanation
(a)
Min1.13P1 + 1.16P2 + 1.52P3 + 1.08M1 + 1.16M2 + 1.25M3
st
P1 + M1 = 201,000
P2 + M2 = 102,000
P3 + M3 = 148,000
M1 + M2 175,000
P1 + P2 160,000
M3 100,000
P3 75,000
P1, P2, P3, M1, M2, M3 0
(b)
Spreadsheet Solution
A B C D E
1 Quantity Demanded
2 PT-100 201,000
3 PT-200 102,000
4 PT-300 148,000
5
6 Capacities
7 Philipines Mexico
8 PT-100 + PT-200 175,000 160,000
9 PT-300 75,000 100,000
10
11 Production Costs
12 Philipines Mexico
13 PT-100 $0.95 $0.98
14 PT-200 $0.98 $1.06
15 PT-300 $1.34 $1.15
16
17 Shipping Costs
18 Philipines Mexico
19 $0.18 $0.10
20
21 Total Costs
22 Philipines Mexico
23 PT-100 $1.13 $1.08
24 PT-200 $1.16 $1.16
25 PT-300 $1.52 $1.25
26
27 Model
28 Quantities Produced
29 Philipines Mexico Total
30 PT-100 41,000 160,000 201,000
31 PT-200 102,000 0 102,000
32 PT-300 48,000 100,000 148,000
33 Total 191,000 260,000
34
35 PT-100 + PT-200 143,000 160,000
36 PT-300 48,000 100,000
37
38 Total Cost $535,410
39
Formulas(See the Instructions tab for more details on using the Solver.)
A B C D E
1 Quantity Demanded
2 PT-100 201,000
3 PT-200 102,000
4 PT-300 148,000
5
6 Capacities
7 Philipines Mexico
8 PT-100 + PT-200 175,000 160,000
9 PT-300 75,000 100,000
10
11 Production Costs
12 Philipines Mexico
13 PT-100 $0.95 $0.98
14 PT-200 $0.98 $1.06
15 PT-300 $1.34 $1.15
16
17 Shipping Costs
18 Philipines Mexico
19 $0.18 $0.10
20
21 Total Costs
22 Philipines Mexico
23 PT-100 =B13+$B$19 =C13+$C$19
24 PT-200 =B14+$B$19 =C14+$C$19
25 PT-300 =B15+$B$19 =C15+$C$19
26
27 Model
28 Quantities Produced
29 Philipines Mexico Total
30 PT-100 =SUM(B30:C30)
31 PT-200 =SUM(B31:C31)
32 PT-300 =SUM(B32:C32)
33 Total =SUM(B30:B32) =SUM(C30:C32)
34
35 PT-100 + PT-200 =SUM(B30:B31) =SUM(C30:C31)
36 PT-300 =B32 =C32
37
38 Total Cost =SUMPRODUCT(B23:C25, B30:C32)
39
  1. Click the Data tab in the Ribbon.
  2. Click Solver in the Analyze group.
  3. When the Solver Parameters dialog box appears: enter $B$38 in the Set Objective: box. Select Min for the To: option. Enter $B$30:$C$32 in the By Changing Variable Cells: box.
  4. Click the Add button. When the Add Constraint dialog box appears, enter $D$30:$D$32 in the left-hand box under Cell Reference:, select = from the dropdown button, enter $B$2:$B$4 in the Constraint: box, and click Add.
  5. When the Add Constraint dialog box appears, enter $B$35:$C$36 in the left-hand box under Cell Reference:, select <= from the dropdown button, enter $B$8:$C$9 in the Constraint: box, and click OK.
  6. Select the checkbox for Make Unconstrained Variables Non-Negative.
  7. From the drop-down menu for Select a Solving Method:, choose Simplex LP.
  8. Click Solve.
  9. When the Solver Results dialog box appears, select Keep Solver Solution, select Sensitivity, and click OK.
A screenshot of Excel is shown. A dialog box labeled "Solver Parameters" is shown.
  • The text $B$38 is in the text entry box labeled "Set Objective:."
  • The text $B$30:$C$32 is in the text entry box labeled "By Changing Variable Cells:."
  • A box labeled "Subject to the Constraints:" has buttons labeled "Add," "Change," "Delete," "Reset All," and "Load/Save" next to it. The text $D$30:$D$32 = $B$2:$B$4 is entered into the box on the first line and the text $B$35:$C$36 <= $B$8:$C$9 is entered into the box on the second line.
  • A group of radio buttons is labeled "To:" and has buttons labeled "Max", "Min", and "Value of:". The radio button labeled "Min" is selected.
  • A checkbox labeled "Make Unconstrained Variables Non-Negative" is selected.
  • A dropdown list labeled "Select a Solving Method:" has the option Simplex LP selected and a button labeled "Options" next to it.
  • A button labeled "Solve" near the bottom of the dialog box is highlighted.
(c)
Using the sensitivity analysis we find the range of optimality for the objective function coefficient for P1 is a lower limit of $1.13 $.05 = $1.08. Thus, the production and/or shipping cost would have to decrease by more than 5 cents per unit.
(d)
Using the sensitivity analysis we find the range of optimality for the objective function coefficient for M2 is a lower limit of $1.16 $.05 = $1.11. Thus, the production and/or shipping cost could have to decrease by more than 5 cents per unit.
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10. /12 points CammBA4 15.E.012. My Notes
Question Part
Points
Submissions Used
1 2 3 4 5 6 7 8 9 10 11 12
/1 /1 /1 /1 /1 /1 /1 /1 /1 /1 /1 /1
0/100 0/100 0/100 0/100 0/100 0/100 0/100 0/100 0/100 0/100 0/100 0/100
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Embassy Publishing Company received a six-chapter manuscript for a new college textbook. The editor of the college division is familiar with the manuscript and estimated a 0.6504 probability that the textbook will be successful. If successful, a profit of $950,000 will be realized. If the company decides to publish the textbook and it is unsuccessful, a loss of $150,000 will occur.
Before making the decision to accept or reject the manuscript, the editor is considering sending the manuscript out for review. A review process provides either a favorable (F) or an unfavorable (U) evaluation of the manuscript. Past experience with the review process suggests probabilities
P(F) = 0.7
and
P(U) = 0.3
apply. Let
s1 = the textbook is successful,
and
s2 = the textbook is unsuccessful.
The editor's initial probabilities of s1 and s2 will be revised based on whether the review is favorable or unfavorable. The revised probabilities are as follows:
  • P(s1|F) = 0.75
  • P(s2|F) = 0.25
  • P(s1|U) = 0.418
  • P(s2|U) = 0.582
(a)
Construct a decision tree assuming that the company will first make the decision of whether to send the manuscript out for review and then the decision to accept or reject the manuscript. (For each blank, enter the probability associated with the event.)
A decision tree has 8 answer blanks. Refer to the adjacent list for more information.
  • A decision tree begins at decision node 1 and an upper and lower branch extend from this node to the right. The upper branch, labeled "Review," stops at chance node 2 and an upper and lower branch extend from this node to the right. The lower branch extending from decision node 1, labeled "Do Not Review," stops at decision node 3 and an upper and lower branch extend from this node to the right.
  • The upper branch extending from chance node 2 is labeled "Favorable," has an answer blank beneath it, and stops at decision node 4. The lower branch extending from chance node 2 is labeled "Unfavorable," has an answer blank beneath it, and stops at decision node 5. The upper branch extending from decision node 4, labeled "Accept," stops at chance node 7 and the lower branch, labeled "Reject," ends at a value of 0. The upper branch extending from decision node 5, labeled "Accept," stops at chance node 8 and the lower branch, labeled "Reject," ends at a value of 0.
  • The upper branch extending from decision node 3, labeled "Accept," stops at chance node 6 and an upper and lower branch extend from this node to the right. The lower branch, labeled "Reject," ends at a value of 0.
  • From top to bottom, the furthest right chance nodes are 7, 8, and 6. Each node has an upper branch and lower branch. Each upper branch is labeled "Success," has an answer blank beneath it, and ends at a value of 950. Each lower branch is labeled "Failure," has an answer blank beneath it, and ends at a value of 150.
(b)
Assuming the manuscript review process is free, using the expected value approach, determine the optimal decision strategy.
    
(c)
If the manuscript review costs $15,000, what is your recommendation?
    
(d)
What is the expected value of perfect information (in $)?
EVPI = $
What does this EVPI suggest for the company?
This EVPI suggests a better procedure for assessing the market potential for the textbook may .
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