Jill is the manager at Costco’s bakery. She needs to decide how many birthday cakes to bake each day. Her choices are to bake 10, 20, or 30 cakes today. Each cake sells for $ 16 and costs $ 6 to make. A day old cake can be sold at a reduced price of $ 4. Assume the daily demand for birthday cakes is 10, 20, or 30 and that the demand probabilities are 25%, 40% and 35% respectively.
a. Using decision making under risk, recommend the number of birthday cakes Jill should bake today.
b. What is the most that Jill should pay per day for additional information?