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Question 4. (22 marks) PART A Michelle Grant operates Cheap Building Limited in Morant Bay. A bag of gravel is sold to customers for $800
Question 4. (22 marks) PART A Michelle Grant operates Cheap Building Limited in Morant Bay. A bag of gravel is sold to customers for $800 and cost $750 to package. The total cost to package includes direct materials as well as direct labour costs. Unsold gravels are dumped and costs cannot be recovered. Based on past experience, it is expected that the entity operates a 250-day year and the entity will require the following daily bags of gravel: Operating days Bags of gravel On 50 days of the year 500 bags On 75 days of the year 750 bags On 125 days of the year 1,000 bags Required: a) Prepare a payoff table which should include the probabilities (8 marks) b) Determine the level of production based on the following decision rules: (1) Maximin (1 mark) (ii) Maximax (1 mark) (1) Expected value (3 marks) Page 4 of 5
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