Question
Farm Grown, Inc., produces cases of perishable food products. Each case contains an assortment of vegetables and other farm products. Each case costs P7 to
Farm Grown, Inc., produces cases of perishable food products. Each case contains an assortment of vegetables and other farm products. Each case costs P7 to produce and sells for P15. If there are any cases not sold by the end of the day, they are sold to a large food processing company for P3 a case. If its own supply of cases is less than the demand, it buys the necessary vegetables from a competitor. The estimated cost of doing this is P11 per case. The probability that daily demand will be 100 cases is 0.3, the probability that daily demand will be 200 cases is 0.4, and the probability that daily demand will be 300 cases is 0.2 and the probability that daily demand will be 400 cases is 0.1.
Complete the table below:
Pay off table | Demand | |||
100 | 200 | 300 | 400 | |
Order size | ||||
100 | Answer | Answer | Answer | Answer |
200 | Answer | Answer | Answer | Answer |
300 | Answer | Answer | Answer | Answer |
400 | Answer | Answer | Answer | Answer |
Probabilities | 0.3 | 0.4 | 0.2 | 0.1 |
Expected value of CM | |||||
Demand | |||||
100 | 200 | 300 | 400 | ||
Order size | |||||
100 | Answer | Answer | Answer | Answer | Answer |
200 | Answer | Answer | Answer | Answer | Answer |
300 | Answer | Answer | Answer | Answer | Answer |
400 | Answer | Answer | Answer | Answer | Answer |
Expected value of perfect information CM | ||||||
CM | Probability | Total | ||||
100 | Answer | 0.3 | Answer | |||
200 | Answer | 0.4 | Answer | |||
300 | Answer | 0.2 | Answer | |||
400 | Answer | 0.1 | Answer | |||
Expected CM given perfect information | Answer | |||||
EV of CM on best course of action | Answer | |||||
EVPI | Answer |
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