Jason is the owner of a local factory. He has been active in getting new production contracts for his factory. Although he just realizes that he needs to rent storage space at a near-by location in 2021 for his products. There are four different storage space renting services available near his factory’s location. Here they are:

Applewood Renting: The initial contract fee is $1,200. Each square foot is $5.00

Blocks Renting: There is no initial contract fee. Each square foot is $8.25

Comfort Renting: The initial contract fee is $1,800 which also includes the first 200 square feet free of charge. Each square foot beyond the included 200 square feet is $3.25.

Dickson Renting: The flat fee with unlimited square feet access is $2,800.

Jason wants to select only one of these four possible renting services. He reviews his possible incoming product orders and estimates his factory will produce between 55 to 175 units. Each unit of his products requires 3 square-feet storage space. The projected probabilities for the possible 2021 annual production are:

Probability (2021 annual production of 55 units) = 0.35

Probability (2021 annual production of 95 units) = 0.15

Probability (2021 annual production of 135 units) = 0.45

Probability (2021 annual production of 175 units) = 0.05

(A-1) Which renting service should Jason select according to the conservative approach?

(A-2) Construct a renting fee regret table and report which renting service should Jason select according to the Minimax regret approach.

(A-3) Which renting service should Jason select according to the expected value approach?

(A-4) If a business analyst can offer Jason the perfect prediction regarding his 2021 annual production unit count, how much is this perfect prediction worth to Jason?

Answer rating: 100% (QA)

A1 Conservative approach Decision Alternative Maximum Payoff Applewood Rentingd3 1200 Block rentin... View the full answer