a) A baker is trying to decide the number of batches of a particular type of bread that should bake each day. Daily demand
a) A baker is trying to decide the number of batches of a particular type of bread that should bake each day. Daily demand ranges from 10 batches to 12 batches. Each batch of bread that is baked and sold yields a positive contribution of K50, but each batch of bread baked that is not sold yields a negative contribution of K20. Assume the baker adopts the minimax regret decision rule, calculate the number of batches of bread that he should bake each day. you must justify your answer (10 Marks) b) A company expects to sell 1000 units per month of a new product but there is uncertainty as to both the unit selling price and the unit variable cost of the product. The following estimates of selling price , variable costs and their related probabilities have been made: Selling price unit variable cost K' per unit probability K' per unit probability 20 25% 20% 25 40% 10 50% 30 35% 12 30% There are specific fixed costs of K5000 per month expected for the new product. What is the expected value of the monthly contribution and the probability of the monthly contribution from the new product exceeding K 13,000?
Step by Step Solution
3.34 Rating (157 Votes )
There are 3 Steps involved in it
Step: 1
Answer The contribution table is given below Note Let Ks050K20 20 SalesD...See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started