Reference no: EM132303125

Decision Support Tools

Learning outcomes

Upon successful completion of this subject, students should:
• be able to demonstrate problem-solving skills in assessing, organising, summarising and interpreting relevant data for decision making purposes;
• be able to apply decision theory to business situations;
• be able to explain the use of simulation in complex decisions;
• be able to apply probability concepts to decision making;
• be able to demonstrate understanding of the application of statistical hypothesis testing to decisions, with particular emphasis on quality control and interpreting the significance of regression coefficients in cost estimation;
• be able to use accepted time-series forecasting methods;
• be able to apply cost-volume-profit analysis and linear programming to product mix decisions; and
• be able to solve scheduling problems.

Assessment item 1

Task

QUESTION 1 Probability

Show all calculations/reasoning

(a) What is the meaning of the term 'expected value', and what does it measure? How is it computed for a discrete probability distribution? Demonstrate your answer with a practical example.

(b) Consider the following record of daily sales of loaves of sourdough bread over the last 100 days.

1. Copy the above table into Excel and using formulas complete the missing column figures

(note that the 5th and 6th columns refer to cumulative probability distributions) while the last 2 columns contain variance calculations. All cells (except for cols 1 and 2) are to contain formulas so no fudging. Answer the questions below by highlighting the answers in your table, and simply repeating these figures against answers 2 to 6. After answering the questions below paste your Excel model into Word, twice, once showing the output and once showing formulas (with row and column headings).

2. What were the average daily sales? Highlight your answer in the spreadsheet and repeat it here.

3. What was the probability of selling 2 or more loaves on any one day? Highlight your answer in the spreadsheet and repeat it here.

4. What was the probability of selling 3 or less? Highlight your answer in the spreadsheet and repeat it here.

5. What is the variance of the distribution? Highlight your answer in the spreadsheet and repeat it here.

6. What is the standard deviation? Highlight your answer in the spreadsheet and repeat it here.

(c) A lot of 10,000 parts, produced on four machines, was graded according to three grades. These results were:

What is the probability that a part selected at random:

1. Was produced by Machine W and should be reworked?
2. Was produced by Machine Z and is not satisfactory?
3. Was produced by Machine Y and should be scrapped?
4. Needs to be reworked?
5. Needs to be scrapped given that it was produced by machine W?
(d) The average sales of apples is 4000 with a standard deviation of 500.
1. What is the probability that sales will be greater than 4250 apples?
2. What is the probability that sales will be less than 3600 apples?

3. What is the probability that sales will be less than 4500 apples?

QUESTION 2 Research Question

The following question involves learning/employing research skills in searching out data on the Internet
Search the Internet for the latest figures you can find to answer the following questions:

1 What is the average age of the Australian population?
2 What is the average age to die in Australia (for both men and women)?
3 What percentage of people work in Australia?

QUESTION 3 Statistical Decision Making and Quality Control Show all calculations/reasoning

(a) A company wishes to set control limits for monitoring the direct labour time to produce an important product. Over the past the mean time has been 30 hours with a standard deviation of 6 hours and is believed to be normally distributed. The company proposes to collect random samples of 64 observations to monitor labour time.

1. If management wishes to establish x-bar control limits covering the 95% confidence interval, calculate the appropriate UCL and LCL.
2. If management wishes to use smaller samples of 9 observations calculate the control limits covering the 95% confidence interval.

(b) Hypothesis testing
The average age of employees at Sturt Ltd is 42. In a retrenchment, 49 persons were laid-off. Their mean age was 45. The Equal Opportunity Commission claimed that Sturt was guilty of age discrimination because it had laid-off older than average workers.

Is the information sufficient evidence to support the claim of age discrimination if σ (sigma) =
years? Use α = 0.05.
1. Show the null and alternative hypotheses.
2. Calculate the critical value (actual value or Z-value)
3. Sketch the situation, showing the critical value and the reject region (in terms of actual values or Z-values).
4. Explain your conclusion

Presentation
You should refer to the marking criteria for each assessment item. You should also follow the directions given in each question.
Requirements:
1. Present answers in the same sequence as the questions set.
2. The front page of your assessment should consist of :
• subject code and subject name
• your name and student number
• assessment item number
3. Other pages should include:
• statement of academic integrity
• list of questions attempted
• student name and number on each page submitted
• pages should be numbered
• bibliography on last page

Assessment item 2 Task
The following collaborative research project aims to advise Medium-large Enterprise Managers regarding Software Tools that support corporate decision-making.

The project requires you to work in groups, each group consisting of 3(min) to 5(max) students. Please confirm your group composition and the topic of your selection with your lecturer.

Research 1-2 commonly used Software Tools that support corporate decision-making through modelling and analysis. Describe the growth of such tools in the past decade.

It's desirable to focus on an industry or organisation of your choice like Transport, Retail, Health Service or others. You can use graphs, tables, case studies, as you deem fit, to present your case(s).

List and briefly illustrate at least 2 features of commonly used Software Tools that support decision-making.

These features can include: Statistical decision making and quality control, forecasting, simulation, inventory management, project management or any other area(s) of interest for the industry or organisation you have chosen.

Collective reflection on the group process, outlining team formation, communication, task allocation, peer review and conflict management.
Professionally presented and suitably referenced report, in your own words.

Making presentations and working in teams are important professional skills. As a graduate accountant with a Master's degree you are expected to be able to justify and communicate accounting advice and ideas in diverse collaborative contexts. In this assessment, you are developing and demonstrating some of these skills.

Your research should include at least 3 references, such as the professional body articles as well as text books and peer reviewed academic journals. Vendor websites are not appropriate sources of information for this task. Use appropriate referencing in your report.

Assessment item 3

Show all calculations to support your answers.

(a) Describe the advantage in using a payoff matrix to analyse decisions. Explain the steps required in developing such a matrix.

(b) What advantage do decision trees provide and in what situations are they preferred to a payoff matrix?

(c) George Goleb is considering the purchase of two types of industrial robots. The ROB1 is a large robot capable of performing a variety of tasks, including welding and painting. The ROB1 is a smaller and slower robot, but it has all the capabilities of ROB1. The robots will be used to perform a variety of repair operations on large industrial equipment. Of course, George can always do nothing and not buy any robots.

The market for the repair operation could be either favourable or unfavourable. If the market is favourable ROB1 is expected to return $50,000 profit and ROB2 $30,000 profit. If the market is unfavourable ROB1 is expected to lead to a loss of $40,000 and ROB2 to a loss of $20,000.
1. Construct a payoff matrix showing the 3 possible alternatives and the associated profits or losses under the 2 market conditions.
2. Showing all calculations, what is the optimum action and its expected payoff if George is an optimist?
3. Showing all calculations, what is the optimum action and its expected payoff if George is a pessimist?
4. Showing all calculations, what is the optimum action and its expected payoff if George follows the Laplace criterion?
5. Showing all calculations, what is the optimum action and its expected payoff if George uses the criterion of regret?
6. If George believes that the probability of a favourable market is 0.6, showing all calculations determine the optimum action and expected return.
7. What is the expected value of perfect information?

QUESTION 2 Value of information

Show all calculations to support your answers. You may follow the methods shown in the mp4 on Value of Info for a way to answer this question if you wish.

Round all probability calculations to 2 decimal places.
Referring to Q1c, Recall the optimum action based on expected values was to purchase ROB1 with an EMV of $14,000.

George Goleb is considering the possibility of conducting a survey on the market potential for industrial equipment repair using robots. The cost of the survey is $5,000.

The market survey results can be classified as positive or negative. Given past experience with the market survey personnel, the conditional probabilities are p(positive signal|favourable market = 0.9 and p(negative signal|unfavourable market) = 0.8.

a) Revise the prior probabilities of 0.6 and 0.4 in light of these likely survey results.
b) What is the posterior probability of a favourable market given a positive survey result?
c) Calculate the EVSI and ENGSI.
d) What is the maximum the firm should pay for the market survey?

QUESTION 3 Simulation

This is a work integrated assessment item. The tasks are similar to what would be carried out in the workplace.

You have just been hired as an analyst to assist the manager of ABC airlines. Your first assignment is to examine and report on the profitability and policies of the airline.

ABC Airlines flies a six-passenger commuter flight once a day to Myrtle Beach. A non-refundable one-way fare with a reservation costs $79.

The daily demand and probability distribution for this flight are shown below along with the probability distribution of no-shows. A no-show has a reservation but does not arrive at the gate and forfeits the fare.

If there are not enough seats for a passenger at the gate ABC Airlines refunds his or her fare and also provides $50 compensation. The fixed cost for each flight is $350, regardless of the number of passengers.

1. Set up a simulation model and calculate ABC's profit each day for a month (30 days) and the average profit per flight. There are to be no numbers in the model (only in the data section), and only formulas in the model. Print in WORD the output and then the formulas.

2. ABC would like to investigate the profitability of varying the fare and the compensation for overbooking. What is your recommendation?

3. Write report with your comments on the profitability of the airline and any recommendations you may have for improvement. (no more than 300 words but you may also include any variations in your spreadsheet to demonstrate your points). Address your report to the manager and sign off.

QUESTION 4 Regression Analysis

Pike College is a small business school that offers an MBA program. The main entrance criterion for admission to the MBA program is the Graduate Management Admission Test (GMAT) score (maximum score =800). The following table provides the GPAs (Grade Point Averages) of 12 students who have graduated recently along with their GMAT scores and ages.

Student	GPA	GMAT	AGE
1	3.7	660	34
2	3	580	29
3	3.25	450	24

4	4	710	39
5	3.52	550	30
6	2.83	430	27
7	3.8	540	35
8	4	590	42
9	3.65	720	24
10	3.47	480	30
11	3.33	520	27
12	3.75	670	28

1. Using Excel, perform three regression analyses to regress GPA against GMAT score, then against Age, then against both of them simultaneously. Paste your results into Word. State the cost equation from each. Analyse and comment on the results of each regression as you perform it and determine the best one to use as a basis for future use.

2. If you had to settle for the results of a simple regression, which one would you use and why? Explain any reservations you might have with your selection.

3. A new graduate student has a GMAT score of 600 and is 29 years old. Using the multiple regression output what is this student's predicted GPA?

QUESTION 5 CVP Analysis

Guide to student marks: 20: 6 for a, 4 for b (2+2), 4 for c, 6 for d

1. Product A sells for $12 per unit. The variable cost is $6 per unit. Fixed costs are $1,200. What is the breakeven point in (i) units, and (ii) dollars?

2. How many units are required to earn a target level of profit before tax of $600? What is the margin of safety?

3. What profit would be earned by selling 250 units?

4. A second product B is added, selling for $20 per unit with a variable cost of $8. Total fixed costs for both products are $5,200. A and B are sold in the ratio of 2 of A to 1 of B. Given a tax rate of 30c in the dollar, how many units of each product are required to earn a profit after tax of $1,400?

Attachment:- Decision Support Tools.rar