Bob plans to operate a poultry farm. He currently is deciding thecapacity of this farm. Its size could either be for 100, 150 or 200 chickens. In terms of market forecasts, demand may be low, medium or high. The expected monthly income matrix for the capacities and market forecasts is as follows: Capacity100 chickens150 chickensHigh DemandP85,000130,000Low DemandP85,00040,000Medium DemandP85,000130,000200 chickens(25.000)75.000175.000Required:StrategyRelevant Income ofthe Decisionb.DecisionMaximina.МаximaxC.d.Laplacee.f.Minimax Regret9.h.Expected Value(20:50:30 probabilitiesfor Low: Medium: High)k. Assuming the same probabilities in i and j, how much should Bob bewilling to pay for perfect information

Maximin: Min payoff of decision 100 chickens=85000 Min payoff of decision 150 chickens=40000 Min…

Answered: Low Demand P85.000 40,000 Me (25.000)|…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Bob plans to operate a poultry farm. He currently is deciding the
capacity of this farm. Its size could either be for 100, 150 or 200 chickens. In terms of market forecasts, demand may be low, medium or high. The expected monthly income matrix for the capacities and market forecasts is as follows:

Capacity
100 chickens
150 chickens
High Demand
P85,000
130,000
Low Demand
P85,000
40,000
Medium Demand
P85,000
130,000
200 chickens
(25.000)
75.000
175.000
Required:
Strategy
Relevant Income of
the Decision
b.
Decision
Maximin
a.
Маximax
C.
d.
Laplace
e.
f.
Minimax Regret
9.
h.
Expected Value
(20:50:30 probabilities
for Low: Medium: High)
k. Assuming the same probabilities in i and j, how much should Bob be
willing to pay for perfect information

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