An entrepreneur is planning to market a new brand of bottled unsweetened, organic iced tea. The profit on each bottle of iced tea to be sold has been set at $0.50. The entrepreneur needs to decide on the size of the bottling plant to produce the iced tea. A small bottling plant will have an annual operating cost of $100,000 and be able to fill 500,000 bottles per year. A large bottling plant will have an annual operating cost of $300,000 and be able to fill 1,000,000 bottles per year. Four levels of demand are considered likely: 10,000, 100,000, 500,000, and 1,000,000 bottles per year.

a. Determine the payoffs for the possible levels of production for a small bottling plant.

b. Determine the payoffs for the possible levels of production for a large bottling plant.

c. Based on the results of (a) and (b), construct a payoff table, indicating the events and alternative courses of action.

d. Construct a decision tree.

e. Construct an opportunity loss table.