Use the following information to answer question. A manufacturer is planning its production for the next 6 months. It has to decide how much of an important ingredient to keep in inventory. The demand for the ingredient may be low, medium, or high. The manufacturer is considering holding either a low or a high amount of inventory. The possible payoffs for all the combinations of inventory holding and demand are shown here.

Use the foregoing information to evaluate the action of accumulating a high inventory. (Obtain the expected monetary value by using posterior probability.)

Transcribed Image Text:

Inventory holding Low A High A Probability Demand Low S 200 100 .3 Medium S 300 200 .2 High S3 300 500 .5