# Models

by Emmanuel
(Nigeria)

Explain the relevance of models of decision making in business operations.

 Apr 28, 2011 Results by: If an organization decides on a model they think is the best available and all managers follow that model exactly then the results will more likely be uniform. They think the results will be good.

 Mar 24, 2010 Models of Decision Making by: Dee Reavis Models of decision making provide a formal method for coming to decisions. Any organization would like to make the best decisions possible. For a business for profit, maximization of profits is the goal. If every manager in the the organization is making decisions based on his or her perception of how to make a decision, then the results can be very uneven. The organization can decide on a model for decision making that they think is the best available. If each manager is required to follow that model, then the results will more likely be uniformly good. Theoretically profit will be maximized.

## Life Cycle Cost(LCC)

by Dave Ryan
(Melbourne)

If minimization of LCC is the criteria, which truck should be recommended?

`                       Truck X       Truck YProcurement Cost       \$130000       \$158000Annual Operating Cost  \$25000        \$21000 Annual Failure Rate     0.05           0.06Disposal Cost          \$2000         \$2000Useful Life (expected)10 years       10 yearsAnnual Interest Rate     6%             6%Expected Failure Cost  \$2000/yr      \$1500 /yr`

### Comments for Life Cycle Cost(LCC)

 Nov 24, 2009 NPV Analysis Of Life Cycle Costs by: Dee Reavis The numbers work out to be:`First Cost \$130,000 \$158,000Annual Cost Operating 25,000 21,000 Failure 100 90Disposal Cost 2,000 2,000NPV at 6% 297,976 296,548NPV at 10% 259,091 262,145`The NPV at 6% shows that the 2nd option has a lower cost, so it should be chosen.It is interesting to note that when a discount rate of 10% is used, then the first option has a lower cost.

by Sachin
(Pune)