COM315, Decision Support Systems
Exam 1, Chs. 1, 8, 9, 10
Problem 1. (30 pts.)
Wingreen Humidors currently makes two humidors, one of cherry wood and the other of mahogany. The sales price for each model is $85.00 and $155.00, respectively. At these sales prices, the profit contribution of the cherry model is $37, while the mahogany model, though it is the more expensive of the two, contributes only $20 profit per unit due to the higher cost of producing mahogany humidors. Wingreen Humidor can sell no more than 800 cherry and 500 mahogany humidors per month. Wingreen’s fixed costs are $5000 per month. What are the breakeven points for the two products based on profit contribution? Show your work.
Problem 2. (30 pts.)
The Wingreen Humidor Co. is trying to decide which of the first three weeks of the month to buy advertising space for their line of humidors. Based on data owned by the company, the following table of probabilities indicates which week, historically, would be the best for buying ads.
Prior probabilities
Week 1
Week 2
Week 3
probability
.2
.5
.3
Additional data from the finance department reveals that Wingreen could expect the following returns for each of two buying strategies: a. buying the ads all at once, or b. spreading the costs evenly between weeks two and three.
Calculate expected return on investment based on this data.
States of nature
Week 1
Week 2
Week 3
Expected return
All at once
-7
6
22
Weeks 2 & 3
0
12
15
The marketing department has, at the last minute, submitted marketing forecasts that predict which week would be the best choice. The data for accuracy or inaccuracy of the marketing reports, week by week, is included in the table below.
Calculate the joint and marginal probabilities based on the new data. Write and submit a short statement explaining/showing your analysis and the best course of action. Show your work.
forecast
Week 1
Week 2
Week 3
accurate
.70
.62
.55
inaccurate
.30
.38
.45
Joint & marginal probabilities
Week 1
Week 2
Week 3
marginal
accurate
inaccurate
marginal
Problem 3. (30 pts.)
Fred's Bank is exceptionally busy on Friday afternoons when everybody comes to deposit their paycheck. Statistics show that throughout the afternoon an average of 64 customers per hour arrive for service. Each member of Fred's crackerjack team of five tellers can handle an average of 13 customers per hour. Assume an exponential distribution for the service rate, a Poisson arrival rate and the equivalent of an M/M/1 queuing system. Show your work.
1. What is the minimum number of tellers required to service the system successfully?
2. Utilization =
3. P(0) =
4. L =
5. Lq =
6. W =
7. Wq =
8. If Fred's customer service requirements are that customers should wait no more than five minutes for service, recommend a course of action between: a. add more tellers, or b. train existing tellers to be more efficient. To add another teller for the afternoon would cost $50 per week per teller for the entire year. To train existing tellers would cost $400 per teller per year to increase their efficiency from 13 to 14.75 customers per hour. Show the cost and values below for each method.
Add Teller Train Tellers
Cost =
9. Utilization =
10. P(0) =
11. L =
12. Lq =
13. W =
14. Wq =
Problem 4. (10 pts.)
What is the name of the method used in simulation modeling using chance?
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