Question
Tom sells hot dogs at the baseball stadium and is trying to decide how large an inventory of buns and hot dogs he should hold.
Tom sells hot dogs at the baseball stadium and is trying to decide how large an inventory of buns and hot dogs he should hold. The table shows his expected payoffs for the size of the crowd and the size of his inventory:
| Inventory | Large Crowd | Medium Crowd | Small Crowd |
| Large | $20,000 | $10,000 | -$2,000 |
| Average | $15,000 | $12,000 | $6,000 |
| Small | $9,000 | $6,000 | $5,000 |
Using the Maximin criteria, what should his inventory be?
Using the Laplace criteria, what should his inventory be?
If he estimates that there is a 30% chance of a Large Crowd, 50% chance of a Medium Crowd, and 20% chance of a Small Crowd, what should his inventory be?
Please show work if possible
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Management Accounting Information for Decision-Making and Strategy Execution
Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young
6th Edition
978-0137024971
