section A (Answer BOTH questions from this section): Question 1 Jones Ltd, a publisher of magazines has a monthly factory capacity of 2,400 units i.e. magazines. However, due to the popularity of ezines available from other publishers, demand from regular customers is now precarious and could be either 800, 1,000 or 1,400 units per month. Jones Ltd sells the magazines to regular customers for 8 per unit and incurs variable costs of 3 per unit. Jones Ltd has been approached by a popular craft promoter and been asked to enter into a special contract to produce a craft magazine. However, the selling price per magazine will need to be set at 6 per unit and the variable costs will remain at 3 per unit. The craft promoter will require a binding agreement with Jones Ltd at a level of 1,800, 1,400 or 1,000 units per month. Required: Students should clearly show all workings. (a) Jones Ltd is considering how best to use its monthly factory capacity if it were to undertake the special contract. Provide all possible contributions in a profit/contribution table. 4 marks (b) Jones Ltd has now gathered information on the probability of monthly demand, from regular customers, as follows: Monthly demand (units) 800 1,000 1,400 Probability 0.15 0.70 0.15 1.00 Using the profit/contribution table and expected values, what is the optimal level of special contracts to commit to every month? 4 marks (c) Using the profit table, and the Maximin rule (risk averse attitude to decision-making), what is the optimal level of special contract to commit to every month? 4 marks (d) Using the profit table, and the Maximax rule (risk seeking attitude to decision-making), what is the optimal level of special contract to commit to every month? 4 marks (e) The Managing Director has recently heard of the Minimax regret rule in relation to risk and uncertainty in decision making but is unsure of how it would apply in this situation. Prepare a note explaining the concept of the Minimax regret rule. Workings are not required. 4 marks