B. F. Retread, a tire manufacturer, wants to select one of three feasible prototype designs for a new tire; A, B, C. Revenues Low (0.30) Medium (0.50) High (0.20) A 120,000 255,000 390,000 B 130,000 295,000 460,000 C 100,000 300,000 480,000 What is the minimum expected opportunity loss?

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15 January, 08:52

B. F. Retread, a tire manufacturer, wants to select one of three feasible prototype designs for a new tire; A, B, C. Revenues Low (0.30) Medium (0.50) High (0.20) A 120,000 255,000 390,000 B 130,000 295,000 460,000 C 100,000 300,000 480,000 What is the minimum expected opportunity loss?

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Kathleen Cowan · Answer 1

Minimum Expected opportunity loss is design A = $241,500

Explanation:

Designs Revenues probability expected Revenue

A $120,000 0.3 $36,000

$255,000 0.5 $127,500

$390,000 0.2 $78,000

Total 241,500

B $130,000 0.3 $39,000

$295,000 0.5 $147,500

$460,000 0.2 $92,000

Total 278,500

C $100,000 0.3 $30,000

$300,000 0.5 $150,000

$480,000 0.2 $96,000

Total 276,000

Design A and Design C are both opportunity losses but between the two opportunity losses Design A is the minimum expected opportunity Loss.