A manufacturing company must decide whether to manufacture a component part. The consulting profit is dependent upon the demand for the product. The following show the projected profit ( in thousands of dollars).
|
Low demand
|
Medium demand
|
High demand
|
|
Decision Alternative
|
S1
|
S2
|
S3
|
|
Manufacture, d1
|
-20
|
40
|
100
|
|
Purchase, d2
|
10
|
45
|
70
|
P(S1)= 0.35
P(S2)=0.35
P(S3)=0.3
1) Use EVPI to determine whether the company should attempt to obtain a better estimate of demand.
2) A market study of the potential demand for the product is expected to report a favorable (F) or unfavorable (U) condition
P(F|S1)=0.1
P(F|S2)=0.4
P(F|S3)=0.6
what is the probability that the market research report will be favorable?
3) What is the expected value of sample information (EVSI)?
Please only type answer on word document