The Decision-Making of Toledo Leather Company

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Decision Tree-Based Diagram
Figure 1: Decision Tree-Based Diagram

Machine 1 (Semi-automated)

Machine 1

Table 1: Nodes Calculation for Machine 1 (Semi-automated)

Nodes Calculation for Machine 1 (Semi-automated)

Machine 2 (Automated)

Machine 2

Table 2: Nodes Calculation for Machine 2 (Automated)

Nodes Calculation for Machine 2

Nodes Calculation:

Nodes Calculation

From the above calculations, the preferred machine should be machine 2, which is automated. Additionally, overtime should be scheduled for the machine because it generates more profits; thus, no modifications are required.

Consider a circumstance in which a person is required to choose from a collection of feasible choices. Each decision results in an unknown reward, which varies according to the option chosen and some unpredictable outcome. In classical probabilistic reasoning, corporations are urged to invest in enterprises that generate the greatest predicted benefit if they have access to probabilities for all actual occurrences (Nakharutai et al., 2021). From the case scenario, two devices are provided in the question that can be regarded as variables of x and y, and the constants for both functions are presented, which yields the two equations in x and y. By employing order derivatives, estimations of the derivatives of the parameters supplied can be obtained, and by setting them to zero, the maximin and maximax values can be derived (Nakharutai et al., 2021). Alternatively, the conclusion is an equally likely criterion if the deviation is zero. The table below provides a payoff matrix table that Toledo Leather Company can use in making decisions about the two machines.

Table 3: Payoff Matrix Table

120,000 130,000 140,000 150,000 160,000 Row Min Row Max
Probabilities 0 0 0 0 0
Semi-automated 240,000 260,000 280,000 288,000 296,000 240,000 296,000
Automated 330,000 357,500 385,000 412,500 431,000 330,000 431,000
Maximum 330,000 431,000
Maximin Maximax

Using the maximin, the company should select the automated machines as it provides the highest value, that is, $330,000. Likewise, in deciding which machine to select using the maximax, the corporation’s best choice would be machine 2 (automated), as it yields a larger value of $431,000 compared to machine 1’s $296,000.

References

Nakharutai, N., Troffaes, M. C., & Caiado, C. C. (2021). Improving and benchmarking of algorithms for Γ-maximin, Γ-maximax and interval dominance. International Journal of Approximate Reasoning, 133, 95-115. Web.

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