Trey Whitmore, Operations Manager at National Consumers, Inc.(NCI), is evaluating alternatives for increasing capacity at NCI's Fountain Hill plant.He has identified four alternatives, and has constructed the following payoff table which shows payoffs (in $1,000,000's)for the three possible levels of market demand: If Trey uses the maximax criterion, the appropriate alternative would be: ___.
A)lease new equipment
B)purchase new equipment
C)add third shift
D)do nothing
E)do everything

Question

Trey Whitmore, Operations Manager at National Consumers, Inc.(NCI), is evaluating alternatives for increasing capacity at NCI's Fountain Hill plant.He has identified four alternatives, and has constructed the following payoff table which shows payoffs (in $1,000,000's)for the three possible levels of market demand:  If Trey uses the maximax criterion, the appropriate alternative would be: ___.
A)lease new equipment 
B)purchase new equipment 
C)add third shift 
D)do nothing 
E)do everything

Quizplus · Accepted Answer

The maximax criterion requires selecting the alternative that results in the maximum possible payoff. Looking at the payoff table, we see that the highest possible payoff for each alternative is:
- Lease new equipment: 17
- Purchase new equipment: 22
- Add third shift: 13
- Do nothing: 8

Therefore, the best choice according to the maximax criterion would be to purchase new equipment, as it has the highest potential payoff.