A company can ship its product from any of its three factories, F1, F2, and F3, to any of its retail outlets, R1, R2, and R3. The supply, demand, and shipping cost information is provided as follows: Demand (units) Supply (units)
R1: 300 F1: 275
R2: 500 F2: 350
R3: 200 F3: 400
Shipping Cost/unit ($)
R1 R2 R3
F1 1 3 2
F2 3 4 2
F3 2 2 3
DECISION ANALYSIS PROBLEM
Use this information to answer the following questions.
ABC Inc. must make a decision on its current capacity for next year. Estimated profits (in $000s) based on next year's demand are shown in the table below.
Next Year’s Demand
Alternative Low High
Expand $100 $200
Subcontract $50 $120
Do Nothing $40 $50
Refer to the information above.
A. Which alternative should be chosen based on the maximax criterion?
B. Which alternative should be chosen based on the maximin criterion?
C. Which alternative should be chosen based on the Laplace criterion?
D. Which alternative should be chosen based on criterion of realism with alpha = 0.7?
E. Which alternative should be chosen based on the minimax regret criterion?