Question

Susan has been thinking about starting her own independent gasoline station. Susan’s problem is to decide how large her station should be. The annual returns will depend on both the size of her station and a number of marketing factors related to the oil industry and demand for gasoline. After a careful analysis, Susan developed the following table:

Answer 1

The Maximax decision is that Susan should build a very large gas station due to the largest value of row maximums.

What is a decision table?

A decision table can be defined as a type of table that is used for the graphical representation of the actions to perform, especially based on given conditions and business level rules.

The decision table for Susan’s problem is shown below:

Size            Good market   Fair market   Poor market    Row maximum

Small              50,000           20,000            -10,000           50,000

Medium          80,000           30,000            -20,000          80,000

Large              100,000          30,000            -40,000          100,000

Very large      300,000         25,000            -160,000         300,000

Thus, the Maximax decision is for Susan to build a very large gas station due to the largest value of row maximums.

For the Maximin decision, we have:

Size            Good market   Fair market   Poor market    Row minimum

Small              50,000           20,000            -10,000           -10,000

Medium          80,000           30,000            -20,000          -20,000

Large              100,000          30,000            -40,000          -40,000

Very large      300,000         25,000            -160,000         -160,000

Therefore, the Maximin decision is that Susan should build a small gas station due to the largest value of row minimums.

For the equally likely decision, we would find the row average:

Row 1 = (50,000 + 20,000 - 10,000)/3 = 20,000.

Row 2 = (80,000 + 30,000 - 20,000)/3 = 30,000.

Row 3 = (100,000 + 30,000 - 40,000)/3 = 30,000.

Row 4 = (300,000 + 25,000 - 160,000)/3 = 55,000.

Hence, the equally likely decision is that Susan should build a very large gas station due to the largest value of row average.

Read more on decision making here: https://brainly.com/question/13171394

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Complete Question:

Even though independent gasoline stations have been having a difficult time, Susan has been thinking about starting her own independent gasoline station. Susan’s problem is to decide how large her station should be. The annual returns will depend on both the size of her station and a number of marketing factors related to the oil industry and demand for gasoline.  After a careful analysis, Susan developed the following table:

a. Develop a decision table for this problem

b. What is the maximax decision?

c. What is the maximin decision?

d. What is the equally likely decision?