The manufacturer of baby strollers is planning to develop a new high-end stroller. Management is considering three price ranges and has estimated demand based on their recent market research among the elites. If the price is $5,100 demand is expected to be 5,000 strollers, at $6,000, the estimated demand is 3,650 and at $7,200 expected demand is 2,100. Management is also considering three variable costs associated with the price options; $2,040, $2,520, and $3,120.

Required

(a) Produce an expected values table clearly showing the contribution for each of the nine possible outcomes. 

(b) Explain the terms ‘maximax,’ ‘maximin’ and the ‘minimax regret’ and advise management on each based on your calculations in a.

 

Answer rating: 100% (QA)

SOLUTION STEP 1 STEP 2 EXPLANATION Solution The specific heat of ... View the full answer