Question: ABC Calculator Company is about to release a new machine on the market, and the company executives are trying to decide whether to develop a full, partial, or minimum production schedule. The optimal schedule will depend on the projected sales for this machine. The profits as a function of sales potential, production schedules and probabilities of success are as follows:

If a full production schedule is chosen and sales are good, the company can expect to grow and to control much of the market before other companies can market a similar product. However, if a full production schedule is chosen but the sales are poor, the company’s losses will pose a serious threat to its survival. So choosing a full production schedule is risky.

1. Suppose that the executives of ABC Corporation cannot agree on their probability assignments as well as the profits of the full production schedule for both good sales and poor sales. Perform sensitivity analyses to evaluate the consequences of these uncertain to the decision of Full, Partial or Minimum Schedule. Find the breakeven points and discuss. Make sure in your discussion that you explain what the breakeven points are, What decisions you would make as a function of those points, and how sensitive those values are to your decision.
2. The executives of ABC Corporation want to ensure that their analysis of which production schedule to choose is as accurate as possible. They release a Request for Proposal (RFP) to find a marketing firm to provide them with better information on which to base their decision on. Two firms provide them with the following information:
   Firm A:
   p(favorable survey/good potential sales) \(=0.92\)
   P(unfavorable survey/poor potential sales) \(=0.88\)
   Firm B:
   \(\mathrm{p}(\) favorable survey/good potential sales) \(=0.94\)
   P(unfavorable survey/poor potential sales) \(=0.90\)
   Survey Cost:
   Firm \(\mathrm{A}\) is $600,000
   Firm B is $800,000
   Develop a decision tree and solve to help ABC Corporation with their decision.
3. What is the expected value of perfect information and the expected value of sample information. Interpret.) Also find the efficiency of sample information.

Price: $2.99

Solution: The downloadable solution consists of 7 pages
Deliverable: Word Document