Chapter 2- Payoff Table- Decision Analysis 1. A restaurant must decide how many cases of...
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Chapter 2- Payoff Table- Decision Analysis 1. A restaurant must decide how many cases of milk to stock each week in order to meet demand. The probability distribution of demand during a week is presented in the following table: Each case costs the restaurant 10m.u. The milk is used in the restaurant's products and it is sold at an average price of 12 m.u./case. Unsold cases are sold to a local farmer (who mixes the milk with feed for livestock) for 2 m.u./case. How many cases of milk should restaurant order each week? 5. The manager of the greeting card section of Central department store is considering her order for a particular line of Christmas cards. The cost of each box of cards is 12.9 Ron. Each box will be sold for 21.3 Ron during the Christmas season. After Christmas, the cards will be sold for 8.4 Ron a box. The card section manager believes that all leftover cards can be sold at that price. The estimated demand during the Christmas season for the line of Christmas cards, with associated probabilities, is shown as follows: Develop the payoff table for this decision situation, compute the expected value for each alternative and identify the best decision
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