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Question 2-Modelling and Solving Decision-making Problems in a Spreadsheet (Marks: 40) Suppose you and your friend run a small bicycle shop called Friends Bicycle. You
Question 2-Modelling and Solving Decision-making Problems in a Spreadsheet (Marks: 40) Suppose you and your friend run a small bicycle shop called "Friends Bicycle". You and your friend must order bicycles for the coming season. Orders for the bicycles must be placed in quantities of 10. The cost per bicycle is R350 if you and your friend order 10, R335 if you and your friend order 20, R325 if you and your friend order 30, and R320 if you and your friend order 40 . The bicycles will be sold for R500 each. Any bicycles left over at the end of the season can be sold (for certain) at R225 each. If you and your friend run out of bicycles during the season, then you and your friend will suffer a loss of "goodwill" among your customers. You and your friend estimate this goodwill loss to be R25 per customer who was unable to buy a bicycle. You and your friend estimate that the demand for bicycles this season will be 5,15,25, or 35 bicycles with probabilities of 0.2,0.4,0.3 and 0.1 respectively. a. Create a Payoff Table for this problem on a spreadsheet. [16 marks] b. Using a spreadsheet based on this problem, find the best action which you and your friend should opt for under each of the four decision criterion: Maximax, Maximin, Minimax Regret and Expected Value? [24 marks]
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