The Loebuck Grocery must decide how many cases of milk to stock each week to meet demand. The probability distribution of demand during a week is shown in the following table: Demand (cases) 15 16 17 18 Probability .20 25 .40 .15 1.00 Each case costs the grocer $10 and sells for $12. Unsold cases are sold to a local farmer (who mixes the milk with feed for livestock) for $2 per case. If there is a shortage, the grocer consid- ers the cost of customer ill will and lost profit to be $4 per case. The grocer must decide how many cases of milk to order each week. a. Construct the payoff table for this decision situation. 5. Compute the expected value of each alternative amount of milk that could be stocked and select the best decision. E. Construct the opportunity loss table and determine the best decision. d. Compute the expected value of perfect information.

The Loebuck Grocery must decide how many cases of milk to stock each week to meet demand. The probability distribution of demand during a week is shown in the following table: Demand (cases) 15 16 17 18 Probability .20 25 .40 .15 1.00 Each case costs the grocer $10 and sells for $12. Unsold cases are sold to a local farmer (who mixes the milk with feed for livestock) for $2 per case. If there is a shortage, the grocer consid- ers the cost of customer ill will and lost profit to be $4 per case. The grocer must decide how many cases of milk to order each week. a. Construct the payoff table for this decision situation. 5. Compute the expected value of each alternative amount of milk that could be stocked and select the best decision. E. Construct the opportunity loss table and determine the best decision. d. Compute the expected value of perfect information.

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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