Question: Donix bakery is known for producing and distributing fresh bread to a high end market in westlands. A crate of bread is sold at Ksh
Donix bakery is known for producing and distributing fresh bread to a high end market in westlands. A crate of bread is sold at Ksh 2000, having incurred production cost of ksh 1200 for transportation cost and storage cost is 10% of the production cost. If a crate is not sold in the high end market it is sold to low end market at ksh 300 per crate. As a strategy, Donix bakery is open to the following supply options; Crates SS 150 200 300 350 400 450 500 Required; a) Generate the payoff matrix for the problem [2 Marks] b) Based on the following decision criteria, which supply strategy should be selected. i. Maximax criterion [1Mark] ii. Maxmin criterion [1Mark] iii. Minmax criterion [1Mark] iv. Laplace criterion [1Mark] v. Huwicz criterion [1Mark] c) Assuming the following probability of distribution of demand for a crate as follows; Crates DD 150 200 300 350 400 450 500 Probability 0.2 0.1 0.3 0.2 0.1 0.1 0.1 Required; i. Which option will be selected based on expected monetary value (EMV) [2Mark] ii. Compute expected value of perfect information. (EVPI) [1Mark].
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