PUAD630 Acme Single Stage New Product Decision Worksheet Instructions Replicate class examples exactly as demonstrated in class lecture. Submit your worked

PUAD630 Acme Single Stage New Product Decision Worksheet Instructions Replicate class examples exactly as demonstrated in class lecture. Submit your worked data in one single MS Excel Workbook. Create separate (appropriately labeled) worksheets within a single workbook for each example. Example files should be named as follows: Week#_FirstInitialLastname e.g. Week 1 class examples for Michael Phelps would be named Week1_MPhelps.xlsx PUAD 630
Analytical Techniques in Public Administration
Decision Making Examples
Replicate the class examples exactly as demonstrated in the class lecture.
Submit your worked data in one single MS Excel Workbook. Create separate (appropriately
labeled) worksheets within a single workbook for each example.
Example 1.
Acme needs to decide whether to market a product (because it is profitable to do so) or abandon
development (because it is not profitable).
Acme’s cost accountants estimate the following monetary inputs: the fixed costs =$6,000 and the
unit margin = $18.
Acme is also able to assign the following probabilities to its sales volume: great (45%), fair (35%)
and awful (20%)
Each sales volume is multiplied by the unit margin to obtain the net revenues.
The formula for the EMV is the sum of the net revenues minus the fixed costs.
A. Use the EMV criterion to help Acme decide whether to go ahead with the product.
B. Conduct a sensitivity analysis to see whether the best decision changes if the total market
decreases. Specifically, let each of the potential sales volumes decrease by the same percentage
(5%, 10%,15%,20%) and select the best decision in each case.
Decision Making
PUAD 630
Class Examples
Page | 2
Example 2
Acme wants to determine whether to enlist the help of a marketing research firm based on market
conditions and the firm’s ability to predict the market.
The prior probabilities of good or bad markets are 40% and 60%, respectively.
The prediction accuracy of the marketing research firm are given in the table below:
Actual/Predicted
Good
Bad
Good
0.8
0.2
Bad
0.3
0.7
Use Baye’s rule (in MS Excel) to answer the following:
A. What are the chances of a good prediction by the marketing research firm?
B. What is the posterior probability of good market conditions, given a good prediction by the
marketing research firm?
Decision Making
PUAD 630
Class Examples
Page | 3
Acme single-stage new product decision
Decision 1: Continue development and market the new product
Fixed cost
$6.000
Unit margin
$18
Market
Great
Fair
Awful
Probability
0,45
0,35
0,20
Sales volume
600
300
90
EMV
Decision 2: Stop development and abandon product
No payoffs, no costs, no uncertainty
EMV
Net revenue
$10.800
$5.400
$1.620
All monetary values (except the
unit margin in cell B5) are in
$1000s, and all sales volumes
are in 1000s of units.
% decrease in all sales volume
EMV for decision 1
Sensitivity analysis to percentage decrease in all sales volumes
% decrease
EMV for decision 1
5%
10%
15%
20%
Multistage decisions
Market
Good
Bad
Prior probability
0,40
0,60
Probabilities that indicate the accuracy of the predictions
ActualPredicted
Good
Bad
Good
0,8
0,2
Bad
0,3
0,7
Bayes’ rule calculations
Probabilities of predictions
Posterior probabilities, given predictions
MarketPredicted
Good
Bad
Good
Bad
Good
Bad

Purchase answer to see full
attachment