Rowen Remis R.

Iral
Page 1 of 3

SY 2013-2014 Quantitative Methods in Business

2014 February 22

Problem 1 Answers

a. Payoff table
Conditions
100 million sales
50 million sales
<= 1 million
bottles
0 bottle
Payoff
$1 Million Profit
Php 200,000 profit
Loss $2 million
Php 400,000 loss

1
X
-

2
X
-

3
X

4
-

Y
N
N
N

N
Y
N
N

N
N
Y
N

N
N
N
Y

b. Regret Table
Conditions
1
2 3 4
100 million sales
X
- 50 million sales
X <= 1 million
- X bottles
0 Bottle
- X
Regret
$1 Million Profit
N
R R R
Php 200,000 profit
R
N R R
Loss $2 million
R
R N R
Php 400,000 loss
R
R R N
c. 1 Conservative == They should introduce it, only at condition 1 and 2.
2 Optimistic == They should introduce only at Condition 1
3 Minimize Maximum Disappointment = Company should not introduce at
condition 3 to avoid maximum disappointment
d. Yes they should introduce but not in P(1 Million Sales) as they will incur loss of
2Million, and also logically 1/3 and share is better than 1/6.
e. Yes, a thorough study could help in determining the effects for $275,000 and
also it will give rise to other qualitative characteristics that not only the
quantitative data can give and thus prevent a blindness in making the right
decision on marketing the new cola.
Problem 2
a. Optimal decision is not to produce because there is a lesser loss in failure of
the decision in NOT Producing. The success range is optimal in producing.

Rowen Remis R. Iral

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SY 2013-2014 Quantitative Methods in Business

2014 February 22

b. EVPI Expected Value of Perfect Information

EVd1 = .6 (250,000) + .4(300,000) = 270,000 EVBest
EVd2 = .6(50,000) + .4 (20,000) = 38,000
EVwPI = .6(250,000)+.4(20,000) = 158,000
EVPI = 270,000 158,000 = 112000
c. EVI and Efficiencies
Stanton
EVd1 = .7 (250,000) + .4 (300,000) = 295,000 EVBest
EVd2 = .7(50,000) + .4 (20,000) = 43,000
EVwPI =.7(250,000) + .4 (20,000) = 183,000
EVPI = 295,000 183,000 = 112000
New World
EVd1 = .6(250,000) + .3(300,000) = 240,000 EVBest
EVd2 = .6(50,000) + .3(20,000)= 36,000
EVwPI = .6(250,000) + .3(20,000) = 156,000
EVPI = 240,000 156,000 = 84,000
d. New World should be hired since it asks for a lower price to get the learning.
e. The one to be hired should be Stanton, although they charge higher than the
New World, they will offer a higher success rate as they can give you a more
detail of what is being learned.
Problem 3
a. a = 0.8 gives a better forecast as it does not give a value of identity (1)
b. Exponential Smoothing
For a = .8, 1 - a = .2
F1
= 110
F2 = .8(110) + .2(110)
= 110
F3 = .8(115) + .2(110)
= 114
F4 = .8(125) + .2(114)
= 122.80
F5 = .8(120) + .2(122.80) = 120.56
F6 = .8(125) + .2(120.56) = 124.11
F7 = .8(120) + .2(124.11) = 120.82
F8 = .8(130) + .2(120.82) = 128.16
F9 = .8(115) + .2(128.16) = 117.63
F10= .8(110) + .2(117.63) = 111.53
c. F11 = (0.6)*130 + (0.3)*110 + (0.1)* 115= 122.5
Problem 4
a. In December 423.667
b.
c. F10 = .1YSep. + .3YOct. + .6YNov.
= .1(399) + .3(412) + .6(408)
= 408.3
Problem 5

Rowen Remis R. Iral

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SY 2013-2014 Quantitative Methods in Business

2014 February 22

PERT

a.
b.
c.
d.
e.

Critical Path = 128 hours == B,D,H,I,J,K,L

Yes
No.
6 hours of Delay
133 138 = 5 Hours of Delay, because to G only maximum of 6 hours is
allowable and in L if delayed would add 4 Hours, thus giving 5 hours.