Accounting Decision Support Tools- Doc

Accounting
Decision Support
Tools
Assessment item – 3
[Pick the date]
Student Name

Question 1
(a) The process invovled in decision making is not a single step process but rather consists of a
number of steps.
 First, the decision related expectations needs to be defined along with identification
of possible outcomes in relation to the decision to be made.
 The various alternatives available at the behest of the decision maker need to be
outlined.
 Considering the crucial role of the states of nature, they must be defined and also their
underlying possibility predicted with as much accuracy possible.
 Further, in the light of the states of nature, the payoff matrix needs to be formed
which would highlight the payoffs associated with each alternative.
 Taking the payoff matrix into consideration along with the decision model approved,
a decision is finalised by the decision maker.
(b) In case of any particular decision, the decision maker would have a plethora of possible
strategies to choose from which are categorised as alternatives. Choosing a suitable
alternative from the perspective of the decision maker becomes challenging owing to the
various states of nature or future scenarios that can arise. A particular alternative may not
work in different states of nature and hence the decision maker needs to choose one
considering the potential states of nature.
(c)(1) The requisite condtional profits matrix is given below:
1

(2)As highlighted in optimistic rule matrix, 30 kilogram will be the best possible option to
purchase sea food by fish vendor in each week.
(3) As highlighted in pessimistic rule matrix, 25 kilogram will be the best possible option to
purchase sea food by fish vendor in each week.
(4) As highlighted in laplace rule matrix, 25 kilogram will be the best possible option to
purchase sea food by fish vendor in each week.
2

(5) As highlighted in regret matrix, 10 kilogram will be the best possible option to purchase sea
food by fish vendor in each week.
(6) As highlighted in maximizing expected matrix, 10 kilogram will be the best possible option
to purchase sea food by fish vendor in each week.
(7) Weekly demand: Normal distribution
Mean value = 20kilogram
Standard deviation =5 kilogram
Kg of sea food for maximum profit =?
z value ¿ NORMSINV ( critical factor )
critical factor= (30−15)
( 30−15 ) +(15−10)=0.75
z value ¿ NORMSINV ( 0.75 )
3