## Operations Fundamentals- Final Exams Case Solution

## Operations Fundamentals- Final Exams Case Solution

**Question 1**

**Part 1: **Maximax is composed of the maximum results from the maximum pay-off or an outcome,which means that more investment would predict high return, basically this type of investment opportunity would be availed by the risk taking investors, who wish to generate more returns in exchange of risky investment. So under this scenario, it can be said that the preferable investment decision that should be taken to generate high results would be considering an investment in Motel as its high invested amount would generate maximum return either of $15000 or $22000.

**Part 2: **In contrast to Maximax, it can be said that the investment decision is based on the minimum outcome or pay-off under maximum return. So under this case, it shows that an investor should look for an opportunity with minimum amount to invest in order to generate high rate of return and to minimize the risk of loss in the future (stable return). Thus in this case, it is concluded that the investor should choose the restaurant as an investment opportunity to utilize the Maximin decision.

**Part 4: **In order to analyze the concept of Minimax regret, it is determined that regret under the case is considered to be an opportunity loss that can be incurred through wrong decision of a particular investment. Therefore, it is clearly indicating that this type of investment is risk-less in a sense because the investor does not want to take risk under high investment with high rate of return. They only consider the stable investment opportunity under moderate rate of return. Therefore, it is identified that the best possible option to choose for an investor would be to go towards the theater due to the fact that it has no direct relationship with the shortage of gasoline.

**Question 2**

**Part 1: Decision Tree**

**Part 2:**From the following analysis, it shows that the maximum expected money value is performed by large arcade due to the fact that it has more options under low demand, which generates high profits as compared to the small arcade.

**Part 3: **If a consulting firm would perform a forecasted demand of both the arcade categories, then it can be said that it would charge $8000 to utilize the proper results and provide accurate picture of the flow. Therefore, if the company would adopt this scenario, then it would increase the overall cost of each category and would have a negative impact over the profit margins. So under the calculated results, it clearly shows that it should reject the offer. However, if the company would determine the lack of forecasted techniques performed by its management, then this offer should be accepted in accordance with the proper generated results.

**Part 4:**From the given scenario, it is concluded that most of the small arcade category would have high demand due to the fact that it has vast expansion opportunities under the lowest cost incurred and therefore would control the cost and price factor accordingly. On the other hand, high demand in large category would be subjected to price decreases in order to achieve the desire outcome. Thus, the only indifferent values performed under each category are the normal level of revenues in case of small arcade and doing nothing under stable growth with large category.

**Question 3**

**A:**

**B:**The optimal value generated through linear programming model would be 6600, whereas the values for the number of storage for each category would be 20 (Large) and 100 (Small) respectively. The corresponding earnings generated by the new results would be $4 per large room and $0.5 per small room on monthly basis...............

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