MGT 221, Fall 2014 – Decision-making under uncertainty
Team case #1
Due Monday, November 24, 2014
Prof. Elodie Goodman
Avalanche Corporation Case study.
You may consider the following question when writing your managerial memo. You do not have to answer them point by point. They are here to guide your analysis of the case. 1. Determine the break-even volume between batch flow and line flow production. 2. Determine the possible net incomes and their expected value for each production level (15,000, 30,000 and 40,000).
3. Identify the optimal production level based on maximizing expected value. 4. Determine the maximum amount that Avalanche is willing to pay for perfect information. 5. Calculate the updated probabilities given the initial probabilities and the consultant’s conditional probabilities.
6. Determine whether or not to hire the consultant based on the updated probabilities. 7. Which of the case estimates are the most uncertain? Assess the impact of a change in one of these estimates on the optimal decision.
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