Payoff Table: Jon Co. agreed to supply Arom Chemical. Inc. with a substance critical to Arom's manufacturing
Question:
Payoff Table: Jon Co. agreed to supply Arom Chemical. Inc. with a substance critical to Arom's manufacturing process. Due to the critical nature of the substance. Jon Co. has agreed to pay Arom $1,000 for any shipment that is not received by Arom on the day it is required. Arom establishes a production schedule that enables it to notify Jon Co. of the necessary quantity 15 days in advance of the required date. Jon can produce the substance in five days. However, capacity is not always readily available, which means that Jon may not be able to produce the substance for several days. Therefore, there may be occasions when there are only one or two days available to deliver the substance. When the substance is completed by Jon Co.'s manufacturing department and released to its shipping department, the number of days remaining before Arom Chemical Inc. needs the substance will be known. Jon Co. has undertaken a review of delivery reliability and costs of alternative shipping methods. The results are presented in the following table.
Required: Prepare a payoff table for Jon Co.'s shipping clerk to decide which shipping alter- native to select if there is: (1) one day before delivery is required; (2) two days before delivery is required; and so forth. up to seven days before delivery is required.
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