Page $2$

Question $2(18$ marks$)$

You work for a small retail store. You must decide how many cases of kombucha to order. Twenty

cases fit on a pallet and because of shipping costs, orders must be placed in multiples of $20.$ You

can either order $20,40,60,80$ or $100$ cases. Each case costs $$15.$ If you order more than $1$ pallet,

you receive a discount of $5\%$ per additional pallet ordered $(2$ pallets would be $5\%,3$ would be $10\%,$

etc$).$ The cases can be sold for $$25$ each. Any that are left unsold can be sold to a discount store for

$$10.$ Your records suggest that the probability that you will sell $25$ cases is $20\%,45$ cases is $45\%,65$

cases is $20\%$ and $85$ cases is $15\%.$

a$)$ Construct a payoff table to provide reflect the decisions and outcomes $(10$ marks$).$

What would be your decision based on each of the following?

b$)$ Maximin $(2$ marks$)$

c$)$ Maximax $(2$ marks$)$

d$)$ Minimax regret $(2$ mark$)$

e$)$ Expected value $(1$ mark$)$

f$)$ Overall $$ what would you do$?$ Why? $(1$ mark