AE 106 – Management Science
Second Semester, SY 2022-2023
Chapter 6 – Quiz – Answer Key
Problem 1:
A1 (Large Plant)
A2 (Small Plant)
A3 (Nothing)
S1 (Favorable)
200,000
100,000
0
S2 (Unfavorable)
-180,000
-20,000
0
Min. Payoff
-180,000
-20,000
0
Max. Payoff
200,000
100,000
0
Maximin: Choice is A3, do nothing, since it has the highest minimum payoff of zero among the three
alternatives.
Maximax: Choice is A1, construct a large plant, since it has the highest maximum payoff of 200,000
among the three alternatives.
Regret Criterion:
A1 (Large Plant)
A2 (Small Plant)
A3 (Nothing)
S1 (Favorable)
0
100,000
200,000
S2 (Unfavorable)
180,000
20,000
0
Max. Regret
180,000
100,000
200,00
Choice is A2, construct a small plant, since it has the lowest maximum regret of 100,000 among the three
alternatives.
Hurwicz Criterion:
A1 (Large Plant)
A2 (Small Plant)
A3 (Nothing)
S1 (Favorable)
60%
200,000
100,000
0
S2 (Unfavorable)
40%
-180,000
-20,000
0
Weighted Average
(200,000 x .60) + (-180,000 x .40) = 48,000
(100,000 x .60) + (-20,000 x .40) = 52,000
(0 x .60) + (0 x .40) = 0
Choice is A2, construct a small plant, since it has the highest weighted average of 52,000 among the
three alternatives.
Accredited: Accrediting Agency of Chartered Colleges and Universities of the Philippines (AACCUP)
Member: Philippine Association of State Universities and Colleges (PASUC)
Agricultural Colleges Association of the Philippines (ACAP)
Problem 2:
Expected Monetary Value
A1 (Outdoor Venue)
A2 (Indoor Venue)
S1 (BW)
30%
-5,000
8,000
S2 (GW)
70%
15,000
7,000
Weighted Average
(-5,000 x .30) + (15,000 x .70) = 9,000
(8,000 x .30) + (7,000 x .70) = 7,300
Choice is A1, outdoor venue, since it has the highest weighted average of 9,000 among the two
alternatives.
Accredited: Accrediting Agency of Chartered Colleges and Universities of the Philippines (AACCUP)
Member: Philippine Association of State Universities and Colleges (PASUC)
Agricultural Colleges Association of the Philippines (ACAP)