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Zade runs a small flower shop. He places orders for the flower bunches and those orders are to be placed in quantities of twenty (
Zade runs a small flower shop. He places orders for the flower bunches and those orders are to be placed in quantities of twenty orders must be multiples of He can place orders for bunches but not for or bunches The cost per bunch is $ if he orders bunches. The cost per bunch is $ if he orders bunches. The cost per bunch is $ if he orders bunches, and it costs her $ if he orders bunches. One bunch of flowers would be sold at $ each. Any bunch left over at the end of the day can be sold at $ each the next morning. If Zade runs out of flower bunches demand is more he will miss on the goodwill of the customer, and he estimates the loss to be $ per bunch from his experience Zade estimates that the demand for flower bunches would be or with probabilities of and respectively. Calculate the payoff table for each possible order and across all possible demand estimates and refer to the videos and How much should Zade stock using Maximax principle?
Come up with decision tree and use the demand probabilities to compute total Expected revenue for each possible order Does your decision change when compared to Maximax criterion?
Note: Your answers must be only based on all the data given but not on heuristics. You must evaluate all the possibilities objectively using the data only to answer the question and do not make any assumptions.
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