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Conrad's Cakes specializes birthday cakes. A birthday cake costs $25 each to make and sells for a price of $35 for the next two days
Conrad's Cakes specializes birthday cakes. A birthday cake costs $25 each to make and sells for a price of $35 for the next two days while it is still fresh. All cakes not sold during the rst two days are discounted and are eventually sold for $15 each. Conrad's demand is assumed to be either 10, 20, 30, or 40 cakes for the two-day period with probabilities 0.10, 0.20, 0.40, and 0.30, respectively. Conrad seeks to determine how many cakes to bake every other day by choosing from the alternatives of 10, 20, 30, or 40 cakes. Which of the following statements are true? 0 None of the answers are correct. 0 The expected value with perfect information is $270. The most that one would pay a consultant for information on the demand for cakes is $70. 0 The payoffs associated with baking 30 cakes have the largest variability as compared to all other decisions. 0 The best decision under the EMV criterion is to bake 20 cakes
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