TWILIGHT bakery is known for producing and distributing fresh bread to a high end market in Kileleshwa. 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. [5 Marks]

b) Based on the following decision criteria, which supply strategy should be selected.

i. Maximax criterion[1 Marks]

ii. Maxmin criterion[1 Marks]

iii. Minmax criterion[1 Marks]

iv. Laplace criterion[1Marks]

v. Huwicz criterion Assuming alpha is 0.75[1 Marks]

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) [3Marks]?

ii. Compute expected value of perfect information. (EVPI) [2 Marks]