Mr. Chan is the owner of small supermarket. He has to decide the amount of fresh cream to stock at the beginning of each week. The cost for each pack of fresh cream is $50 and the selling price is $95 per pound. At the end of each week, any unsold fresh cream will be sold for $10 per pack to a bakery. However, if the supermarket runs out of fresh cream during the week, it will suffer a loss of goodwill among its customers. The goodwill loss is estimated to be $15 per customer who is not able to buy a pack of fresh cream. Mr. Chan can get a 10% discount on the cost price if he orders more than 100 packs. The probability distribution of the weekly demand for fresh cream is:

Demand (packs)	Probability
90	0.4
100	0.2
110	0.2
120	0.2

Construct the payoff table for the above situation and determine how many packs of fresh cream should be order to obtain the highest profit under the maximax, maximin and the Bayes’ decision rule. Find the corresponding expected value of perfect information.

Answer rating: 100% (QA)

Mr Chan have been given different options for demands 90 100 110 120 But not the alternatives of which check upon to get the optimal decision In this above given case he chooses 100 alternatives and i... View the full answer