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# Star Products, Inc. faces uncertain demand conditions in 2012.

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Star Products, Inc. faces uncertain demand conditions in 2012. Management at Star
Products is considering three different levels of output for 2012: 1, 1.5, or 2 million units.
Management has determined that the following profit levels will occur under weak and
strong demand conditions:
Profit (in \$millions) if
Demand is
Output Level Weak Strong
1 million units 60 175
1.5 million units 50 200
2.0 million units –50 400
1. Using each of the four rules for decision making under uncertainty, determine the
output level of 2012.
Maximax rule ______________ units of output
Maximin rule ______________ units of output
Minimax regret rule ______________ units of output
Equal probability rule ______________ units of output
2. Now suppose that management believes the probability of weak demand in 2012 is
25% and the probability of strong demand is 75%. Compute the expected profit,
variance, standard deviation, and coefficient of variation for each level of output:
Output E(π ) 2
σ
σ υ
1 million units
________ ________ ________ ________
1.5 million units
________ ________ ________ ________
2.0 million units
________ ________ ________ ________
3. Based on the expected value rule, Star Products should produce ________ units in
2012.

Answer must be in excel and use Solver when applicable.
Hello,

Thanks for the question.

Hope this helps!

Customer: replied 4 years ago.

These questions also went to the problems but didnt show up.when I originally asked them.

4. Using mean-variance analysis, which level of output should be chosen? Explain your answer.

5. Using the coefficient of variation rule, Star Products should produce ______ units
in 2012. Explain briefly.

Please add it to the original document and then I will rate this for you.

thank you

Hi,

OK, I have updated the answer file with the additional questions.