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  • Seatwork: By: Cheradee Ann M. Cabanlit

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    Susan is considering starting an independent gasoline station and must decide on the size. She developed a decision table showing the projected annual profit for different station sizes under good, fair, and poor market conditions. The table shows that with a small station, the profit would be $50,000 in a good market, $20,000 in a fair market, and -$10,000 in a poor market. A medium station would yield $80,000, $30,000, and -$20,000 respectively. A large station, $100,000, $30,000, and -$40,000. And a very large station, $300,000, $25,000, and -$160,000.

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    Decision Analysis

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    Susan is considering starting an independent gasoline station and must decide on the size. She developed a decision table showing the projected annual profit for different station sizes under good, fair, and poor market conditions. The table shows that with a small station, the profit would be $50,000 in a good market, $20,000 in a fair market, and -$10,000 in a poor market. A medium station would yield $80,000, $30,000, and -$20,000 respectively. A large station, $100,000, $30,000, and -$40,000. And a very large station, $300,000, $25,000, and -$160,000.

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    21 views3 pages

    Seatwork: By: Cheradee Ann M. Cabanlit

    Uploaded by

    buhayche14
    Susan is considering starting an independent gasoline station and must decide on the size. She developed a decision table showing the projected annual profit for different station sizes under good, fair, and poor market conditions. The table shows that with a small station, the profit would be $50,000 in a good market, $20,000 in a fair market, and -$10,000 in a poor market. A medium station would yield $80,000, $30,000, and -$20,000 respectively. A large station, $100,000, $30,000, and -$40,000. And a very large station, $300,000, $25,000, and -$160,000.

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    of 3

    ES412

    SEATWORK
    BY: CHERADEE ANN M. CABANLIT
    COURSE LEARNING OUTCOMES
    • Students are able to share ideas about
    how decision making analysis is done.

    • Students are able to apply the different


    decision making criterion under
    conditiona of uncertainty.
    Even though independent gasoline stations have been having a difficult time, Susan
    Solomon has been thinking about starting her own independent gasoline station.
    Susan’s problem is to decide how large her station should be. The annual returns will
    depend on both the size of her station and a number of marketing factors related to
    the oil industry and demand for gasoline. After a careful analysis, Susan developed
    the decision table. For example, if Susan constructs a small station and the market is
    good, she will realize a profit of $50,000.
    (a) What is the maximax decision? (b) What is the maximin decision? (c) What is the
    criterion of realism decision? Use an α value of 0.8. (d) Develop an opportunity loss
    or regret value table. (e) What is the minimax regret decision?

    Size of First Good Market Fair Market Poor Market


    Station ($) ($) ($)
    Small 50,000 20,000 -10,000
    Medium 80,000 30,000 -20,000
    Large 100,000 30,000 -40,000
    Very Large 300,000 25,000 -160,000

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