MID TERM / FINAL EXAMINATION (UTS/UAS)

ODD / EVEN SEMESTER ACADEMIC YEAR 2019/2020

IPMI INTERNATIONAL BUSINESS SCHOOL

Name : Student ID :
Course : CBC 211 Day/date :
: MANAGERIAL DECISION
ANALYSIS
Study Program : Business Administration (BA) Duration : 120 minutes
:
Weight : 4 credit unit Opened Books/Closed Books/ Essay/Presentation/
Observation/Field Study/Others________________

QUESTION PAPER FOR STUDENT WITH ODD NIM

PART A : Decision Making in Certain Environment & Multiple Criteria (50 marks)
Instruction : Answer ALL TWO (2) questions in this section

1. Alexandro is using the AHP to choose a new cellphone from three possible models: An
Oppo, a Vivo and a Samsung. The choice will be based on three attributes, Battery,
Camera and Screen. Alexandro considers that camera is ‘strongly more important’ than
battery, and camera is very strongly important than screen. He also considers that
battery is ‘extremely important’ than screen. Please refer to table below for pair wise
comparison value
Table 1. Pair wise comparison value
Weakly more important than 3
Strongly more important than 5
Very strongly important than 7
Extremely important than 9

When asked to compare the battery, camera and screen of the cellphones, he gives you
the matrix below

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 Table 2. Battery score for each model Table 3. Camera score for each model

Oppo Vivo Samsung Oppo Vivo Samsung

Oppo 1.00 4.00 3.00 Oppo 1.00 7.00 3.00

Vivo 0.25 1.00 0.50 Vivo 0.14 1.00 0.25
Samsung 0.33 2.00 1.00 Samsung 0.33 4.00 1.00

Table 4. Screen score for each model

Oppo Vivo Samsung

Oppo 1.00 0.33 0.14

Vivo 3.00 1.00 0.33
Samsung 7.00 3.00 1.00

(a) Construct a hierarchy to represent the decision problem.

(5 marks)

(b) Use an excel file, or manual method, to calculate the weights for each table in the
hierarchy and hence determine which cellphone should be purchased.
(15 marks)

(c) With reference to Table 5 calculate the consistency ratios for the Alexandro’s
comparisons of the cellphone on (i) battery, (ii) camera, (iii) screen and interpret
your results
(10 marks)
Table 5. Random consistency index
n 1 2 3 4 5 6 7 8 9 10
RI 0 0 0.58 0.9 1.12 1.24 1.32 1.41 1.45 1.49

2. Strong Muscle Sports Club has budgeted up to $6,000 per week for local advertising. The
money is to be allocated among four promotional media: TV spots, newspaper ads, and
two types of radio advertisements. Strong muscle’s goal is to reach the largest possible
high-potential audience through the various media. Table 6 presents the number of
potential customers reached by making use of an advertisement in each of the four
media. It also provides the cost per advertisement placed and the maximum number of
ads that can be purchased per week.

Table 6 Data for Strong muscle Sports Club

Media Audience Reached Cost per Max Ads per
per Ad Ad week
TV Spot (1 min) 5,000 $800 12
Daily Newspaper 8,500 $925 5
Radio Spot (30 seconds, prime time) 2,400 $290 25

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 Radio Spot (1 minute, afternoon) 2,800 $380 20
Stong muscle’s contractual arrangements require that at least five radio spots be placed
each week. To ensure a broad-scoped promotional campaign, management also insists
that no more than $1,500 be spent on radio advertising every week.

(a) Calculate the optimal solution for each type of media (television, newspaper ad, 30-
second prime time radio spots, and 1-minute afternoon radio spots.
(10 marks)

(b) How many audience exposures will be produced?

(10 marks)

PART B : Decision Making Under Uncertainty (50 marks)

Instruction : Answer ALL TWO (2) question in this section.

3. A company has to decide whether to invest money in the development of a

microbiological product. The company’s research director has estimated that there is a
60% chance that a successful development could be achieved in 2 years. However, if the
product had not been successfully developed at the end of this period, the company
would abandon the project, which would lead to a loss in present-value terms of $3
million. In the event of a successful development, a decision would have to be made on
the scale of production.

The returns generated would depend on the level of sales which could be achieved over
the period of the product’s life. For simplicity, these have been categorized as either
high or low. If the company opted for large-volume production and high sales were
achieved, then net returns with a present-value of $6 million would be obtained.
However, large-scale production followed by low sales would lead to net returns with a
present value of only $1 million.

In contrast, if the company decided to invest only in small-scale production facilities

then high sales would generate net returns with a present value of $4 million and low
sales would generate net returns with a present value of $2 million. The company’s
marketing manager estimates that there is a 75% chance that high sales could be
achieved

a) Construct a decision tree to represent the company’s decision problem.

(5 marks)

b) Assuming that the company’s objective is to maximize its expected returns,

determine the policy that it should adopt.
(10 marks)

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 c) There is some debate in the company about the probability that was estimated by
the research director. Assuming that all other elements of the problem remain the
same, determine how low this probability would have to be before the option of not
developing the product should be chosen.
(10 marks)

d) Before the final decision is made the company is taken over by a new owner, who
has the utilities shown below for the sums of money involved in the decision.

Table 7 Owner’s utility profile

Present value of net New Owner Utility
returns
-$3m 0
$0m 0.6
$1m 0.75
$2m 0.85
$4m 0.95
$6m 1.0

The owner has no interest in other attributes which may be associated with the
decision, such as developing a prestige product or maintaining employment.
What implications does this have for the policy that you identified in (b)

(10 marks)
4. A company’s sales manager estimates that there is a 0.2 probability that sales in the
coming year will be high, a 0.7 probability that they will be medium and a 0.1 probability
that they will be low. She then receives a sales forecast from her assistant and the
forecast suggests that sales will be high. By examining the track record of the assistant’s
forecasts, she is able to obtain the following probabilities:
p (high sales forecast given that the market will generate high sales) = 0.9
p (high sales forecast given that the market will generate only medium sales) = 0.6
p (high sales forecast given that the market will generate only low sales) = 0.3

What should be the sales manager’s revised estimates of the probability of

(a) high sales (5 marks)
(b) medium sales (5 marks)
(c) low sales (5 marks)

END OF QUESTION PAPER

Reference (textbooks,etc.): Acknowledged by:

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(1) Goodwin, P., & Wright, G. (2014).
Decision Analysis for Management
Judgment 5th ed.

(2) Nagraj Balakrishnan, Barry Render,

Ralph M. Stair, Jr 2013 Managerial (Liza A. Maureen Nelloh, SE., MM, CDM)
Decision Modeling, Third Edition. Head of Undergraduate Program