The purpose of this assignment is to examine making a decision using math and statistics.
Here is an example of this type of decision making in daily life, games theory. Ever see the movie “A Beautiful Mind” or read the book? This theory and the start of this type of management decision making was popularized by John Nash. Today, operations managers use math in decision making on a daily basis. This is the idea of the assignment and a skill you want to have or be aware of for the future.
Here is the assignment and some additional tips. Do not let the math and statistics overwhelm you. Break the assignment down step by step, learn about how to calculate the different problems, and use the calculations. Next, tell me your decision and why. See the information below:
A General Manger of Harley-Davidson has to decide on the size of a new facility. The GM has narrowed the choices to two: large facility or small facility
In this assignment, you need to complete the probability analysis, the decision tree model, and expected monetary value (EMV). Use your answers to determine the best choice of the large facility or small facility
The information for your calculations is given to you in this assignment. The probabilities are provided in the set up for the probability analysis by options.
|
Facility |
Demand Options |
Probability |
Actions |
Expected Payoffs |
|
Large |
Low Demand |
0.4 |
Do Nothing |
($10) |
|
Low Demand |
0.4 |
Reduce Prices |
$50 |
|
|
High Demand |
0.6 |
$70 |
||
|
Small |
Low Demand |
0.4 |
$40 |
|
|
High Demand |
0.6 |
Do Nothing |
$40 |
|
|
High Demand |
0.6 |
Overtime |
$50 |
|
|
High Demand |
0.6 |
Expand |
$55 |
The decision tree is provided in the directions and here is the information to calculate EMV:
Determination of chance probability and respective payoffs:
|
Build Small: |
|
|
Low Demand |
0.4($40)=$16 |
|
High Demand |
0.6($55)=$33 |
|
Build Large: |
|
|
Low Demand |
0.4($50)=$20 |
|
High Demand |
0.6($70)=$42 |
Determination of Expected Value of each alternative Build Small: $16+$33=$49 Build Large: $20+$42=$62
The information for the calculations is in the assignment.
This site may be helpful: http://orms.pef.czu.cz/text/game-theory/DecisionTheory.html
There is a sheet you can click on in the directions to review statistical terms (look for Statistical Terms review sheet). You need to use it to aid you. I also have placed You Tube videos and How to information in the Webliography. Additional information is in Doc Sharing
|
How to calculate chance probability (the probabilities are given to you in the directions; use the table in the assignment) |
http://www.wikihow.com/Calculate-Probability
Probability calculator: http://www.calculator.net/probability-calculator.html
|
|
How to calculate EMV |
http://www.wikihow.com/Calculate-Expected-Monetary-Value-%28EMV%29
|
|
How to calculate EMV using a decision tree |
http://www.pmexamsmartnotes.com/how-to-calculate-expected-monitory-value-for-a-project/
|
Note: The directions have
I have additional information in the Webliography and Doc Sharing
· For the decision tree, recreate it and finish the calculation to determine the best decision.
· For chance probability use the table and show your steps for arriving at a number
· For EMV, use the chart in the directions and show your steps for calculating the expected value.
The idea is to explain your decision (large facility or small facility) using your results.
Use your math to explain:
What should Harley-Davidson do?
Should they build a large facility or small facility? Why?
There is a sheet you can click on in the directions to review statistical terms (look for Statistical Terms review sheet). You need to use it to aid you. I also have placed You Tube videos and How to information in the Webliography. Additional information is in Doc Sharing
|
How to calculate chance probability (the probabilities are given to you in the directions; use the table in the assignment) |
http://www.wikihow.com/Calculate-Probability
Probability calculator: http://www.calculator.net/probability-calculator.html
|
|
How to calculate EMV |
http://www.wikihow.com/Calculate-Expected-Monetary-Value-%28EMV%29
|
|
How to calculate EMV using a decision tree |
http://www.pmexamsmartnotes.com/how-to-calculate-expected-monitory-value-for-a-project/ |