Production Operations Management (MGT613)
Semester “Fall 2010”
Assignment No.
1
Marks: 15
“Assignment Title”
Mr. A is the Operations Manager of ABC Company. He has been given the
responsibility to
make the decision for constructing a restaurant. He has three available
alternative points to
construct it out. First alternative is to construct on road S, second is to
construct on road M, and
third is to construct on road D. The data for expected payoff under
three states of nature is
available in the following table.
POSSIBLE FUTURE DEMANDS
Alternatives Low Moderate High
Road
S
Rs. 40 M Rs. 40 M Rs 50 M
Road M Rs. 55 M Rs.60 M Rs 75 M
Road D Rs. 30 M Rs 55 M Rs 85 M
Assuming the payoff under each state of nature what decision would be
appropriate using each
of the following criteria.
a. Maximin
b. Maximax
c. Minimax regret
d. Laplace
Note: Calculation along with interpretation is required in order to attempt
this question. In
the case students do not calculate and interpret, and just write the answers,
will be given
low marks or no marks.
Important Tips
1. This Assignment can be best attempted from the knowledge acquired after
watching video lecture no. 1 to lecture no 10 and reading handouts as
well as
recommended text book).
2. Video lectures can be downloaded for free from www.youtube.com/vu.
Schedule
Opening Date and Time October 27, 2010 At 12:01 AM (Mid-Night)
Due Date and Time
November 01, 2010 At 11:59 PM (Mid-
Night)
Note: Only in the case of Assignment, 24 Hrs extra / grace period after the
above mentioned
due date is usually available to overcome uploading difficulties which may be
faced by the
students on last date. This extra time should only be used to meet the
emergencies and above
mentioned due dates should always be treated as final to avoid any
inconvenience. Important Instructions:
Please read the following instructions carefully before attempting the
assignment solution.
Deadline:
• Make sure that you upload the solution file before the due date. No
assignment will be accepted through e-mail once the solution has been
uploaded by the instructor.
Formatting guidelines:
• Use the font style “Times New Roman” and font size “12”.
• It is advised to compose your document in MS-Word 2003.
• Use black and blue font colors only.
Solution guidelines:
• Use APA style for referencing and citation. For guidance search
“APA
reference style” in Google and read various website containing
information for better understanding or visit
http://linguistics.byu.edu/faculty/henrichsenl/apa/APA01.html
• Every student will work individually and has to write in the form of an
analytical assignment.
• Give the answer according to question, there will be negative marking
for irrelevant material.
• For acquiring the relevant knowledge don’t rely only on handouts but
watch the video lectures and use other reference books also.
Rules for Marking
Please note that your assignment will not be graded or graded as Zero (0) if:
• It has been submitted after due date
• The file you uploaded does not open or is corrupt
• It is in any format other than .doc (MS. Word)
• It is cheated or copied from other students, internet, books, journals
etc…
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Mr. A is the Operations
Manager of ABC Company. He has been given the responsibility to make the
decision for constructing a restaurant. He has three available alternative
points to construct it out. First alternative is to construct on road S, second
is to construct on road M, and third is to construct on road D. The data for
expected payoff under three states of nature is available in the following
table.
|
POSSIBLE
FUTURE DEMAND |
|||
|
Alternative |
Moderate |
Low |
High |
|
Road S |
Rs.
40 m |
Rs.
40 m |
Rs.
50 m |
|
Road M |
Rs.
55 m |
Rs.
60 m |
Rs.
75 m |
|
Road D |
Rs.
30 m |
Rs.
55 m |
Rs.
85 m |
Assuming the payoff
under each state of nature what decision would be appropriate using each of the
following criteria.
a. Maximin
b. Maximax
c. Minimax regret
d. Laplace
a. Maximin
Road
S Rs.
40 M
Road
M Rs.
55 M
Road
D Rs. 30 M
Description: Operation
manager will build the restaurant on Road D because it has minimum possible
pay-off i.e. Rs. 30 m. Therefore, Road D is the Maximin payoff act
b. Maximax
Road
S Rs.
50 M
Road
M Rs.
75 M
Road
D Rs. 85 M
Description: Operation
manager will build the restaurant on Road D as its best of the best numbers
i.e. Rs. 85 M. Therefore, Road D is the Maximax payoff act
c. Minimax regret
|
Alternative |
Moderate |
Low |
High |
Worst
regret |
|
Road S |
Rs.
40 – 55 = -15 m |
Rs.
40 – 60 = -20 m |
Rs.
50 – 85 = -35 m |
-35
m |
|
Road M |
Rs.
55 – 55 = 0 m |
Rs.
60 – 60 = 0 m |
Rs.
75 – 85 = -10 m |
-10 m |
|
Road D |
Rs.
30 – 55 = -25 m |
Rs.
55 – 60 = -5m |
Rs.
85 – 85 = 0 m |
-30
m |
* Subtracting column
entry with the highest column value
Description: So using a
minimax choice based on regret would be that operation manger should build the
restaurant on Road M, ensuring regret no worse than -10 m.
d. Laplace
|
Alternative |
Moderate |
Low |
High |
Calc. |
|
Road S |
Rs.
40 m |
Rs.
40 m |
Rs.
50 m |
130
/ 3= 43.3 |
|
Road
M |
Rs.
55 m |
Rs.
60 m |
Rs.
75 m |
190 / 3 = 63.3 |
|
Road D |
Rs.
30 m |
Rs.
55 m |
Rs.
85 m |
170
/ 3 = 56.7 |
Description: Using
Laplace criterion, operation manager will build the restaurant on Road M as it has the maximum average payoff i.e. 63.3
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