The sweet sisters are a produce processing company that specializes in oranges, with blood orange sales representing most of their revenue. Their main facility receives a daily shipment of oranges, which are then sorted and shipped to grocery stores and to producers of orange juice. The acceptable quality oranges are sole to grocery stores and the low quality are sold to the orange processors. If a low-quality orange is sold to a grocery store, the oranges are returned, and the sweet sisters must pay the store a fee to compensate for the lost sale and extra work of shipping which then affects the reputation. The sweet sister has an algorithm to determine orange quality, but it is not perfect.

The sweet sisters reach out to David Herbert, the accountant of the sweet sisters to help choose between two cutoff prediction probabilities for low quality apples of .50 and .30. Oranges with a predicted probability above the cut-off probability are classified as low quality, and oranges below the cut-off probability are classified as acceptable quality apples. The following confusion matrices are based on the validation sample.

		Confusion Matrix (0.30)
		Predicted Outcomes
		low quality	Acceptable quality
Actual Outcomes	Low Quality	130	20
	Acceptable quality	230	620
		Confusion Matrix (0.50)
		Predicted Outcomes
		low quality	Acceptable quality
Actual Outcomes	Low quality	100	50
	Acceptable quality	120	730

1. David Estimates that oranges of acceptable quality result in a profit of $0.30 per orange. David also knows that low-quality apples can be sole to juice companies at a profit of $0.04. Finally, he estimates that the cost to sweet sisters of selling a low-quality apple to the grocery store as an acceptable-quality apple is $1.05 for each low-quality apple. Construct a payoff Matrix.
2. Using Davids knowledge about the payoff of each outcome, which threshold should the team choose?