Question
Maries Kitchen, a local bakery with two locations, is looking to buy a new commercial oven. Marie has narrowed her decision to three possible ovens.
Maries Kitchen, a local bakery with two locations, is looking to buy a new commercial oven. Marie has narrowed her decision to three possible ovens. She has gathered information about the average cost to use each oven at different levels of demand.
| Predicted Costs by Level of Demand | |||
| Demand | High | Medium | Low |
| Probability | 30% | 40% | 30% |
| Model1 | $2,000 | $200 | $1,400 |
| Model2 | $1,200 | $1,000 | $1,200 |
| Model3 | $1,600 | $600 | $1,600 |
What is the expected cost if Marie's Kitchen has perfect information? [Do not use a $ in your answer)
What is the maximum amount Marie should be willing to pay for perfect information? [Do not use a $ in your answer)
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Cost management a strategic approach
Authors: Edward J. Blocher, David E. Stout, Gary Cokins
5th edition
73526940, 978-0073526942
