At the start of each day, Humber Bakery must determine the quantity of Rexdough (nicknamed Rex) bread to bake. Because the bakery prides itself as the maker of the freshest premium bread in town, units that are unsold by the end of the day are discarded and considered loss. Each Rexdough bread costs $1.86 to produce and sells for $5.06. Humber's objective is to maximize daily gross profit. The bakery's daily production system is set up as follows: Light Production (23,000 units) Moderate Production (30,000 units) Heavy Production (45,000 units) Humber Bakery is uncertain about the demand for Rex but believes that one of the following states of nature (outcomes) will occur: Low Demand (20,000 units) Medium Demand (30,000 units) High Demand (40,000 units) Note: The bakery's sales are limited by its production capacity, and if the bakery produces more than the demand, it can only sell up to the level of demand (excess production is wasted). For example, if production level is moderate (30,000) and demand is low (20,000), the bakery will sell only 20,000 units but will incur the costs of producing 30,000 units. The corresponding gross profit will be $5.06(20,000) - $1.86(30,000) = $45,400. I. Calculate payoffs and EMV

1. Calculate the payoff (daily gross profit, in dollars) for each production/demand level combination and complete the following payoff table.

	Low Demand	Medium Demand	High Demand
Light Production
Moderate Production
Heavy Production

1. After some deliberation, the bakery's manager arrived at the following probabilities of the states of nature (outcomes): P(Low Demand) = 0.6 P(Medium Demand) = 0.2 P(High Demand) = 0.2
2. What is the expected Monetary value of the optimal decision? EMV = $
3. What production plan should Humber Adopt?