Suppose a grocer is faced with a problem of how many cases of milk to stock to meet this week’s demand. The grocer estimates that 10, 15, 20, or 25 cases will be needed and wants to analyze the situation using a payoff table and decision theory to determine how many cases to stock. Every case of milk costs the grocer $55 and will be sold for $90 (if sold during the week). If there are cases left at the end of the week, they will be sold to a food bank for $30 per case. Fill in the payoff table (Using Excel - calculate the payoff for each combination of cases of milk ordered and cases of milk demanded). Cases demanded 10 15 20 25 Cases stocked 10 15 20 25 B. Assume the probability of demand is determined as in the table below. Demand 10 cases 15 cases 20 cases 25 cases Probability .08 .25 .45 .22 Calculate the Expected monetary value for each alternative C. Based on the EMV results, how many cases should the grocer stock?
Suppose a grocer is faced with a problem of how many cases of milk to stock to meet this week’s demand. The grocer estimates that 10, 15, 20, or 25 cases will be needed and wants to analyze the situation using a payoff table and decision theory to determine how many cases to stock. Every case of milk costs the grocer $55 and will be sold for $90 (if sold during the week). If there are cases left at the end of the week, they will be sold to a food bank for $30 per case. Fill in the payoff table (Using Excel - calculate the payoff for each combination of cases of milk ordered and cases of milk demanded). Cases demanded 10 15 20 25 Cases stocked 10 15 20 25 B. Assume the probability of demand is determined as in the table below. Demand 10 cases 15 cases 20 cases 25 cases Probability .08 .25 .45 .22 Calculate the Expected monetary value for each alternative C. Based on the EMV results, how many cases should the grocer stock?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 40P
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- Suppose a grocer is faced with a problem of how many cases of milk to stock to meet this week’s demand. The grocer estimates that 10, 15, 20, or 25 cases will be needed and wants to analyze the situation using a payoff table and decision theory to determine how many cases to stock. Every case of milk costs the grocer $55 and will be sold for $90 (if sold during the week).
If there are cases left at the end of the week, they will be sold to a food bank for $30 per case.
- Fill in the payoff table (Using Excel - calculate the payoff for each combination of cases of milk ordered and cases of milk demanded).
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Cases demanded |
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10 |
15 |
20 |
25 |
Cases stocked |
10 |
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15 |
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20 |
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25 |
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B. Assume the probability of demand is determined as in the table below.
Demand |
10 cases |
15 cases |
20 cases |
25 cases |
Probability |
.08 |
.25 |
.45 |
.22 |
Calculate the Expected monetary value for each alternative
C. Based on the EMV results, how many cases should the grocer stock?
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