BSNS 2120-Quaetitative Business Methods-Pall 2017 2. FarmCo produces case of ban

Question

BSNS 2120-Quaetitative Business Methods-Pall 2017 2. FarmCo produces case of bananas. Each case costs 7 and sells for $16. Based on their historical dato, daily demand for banana was realized as 400 cases or 450 cases or 500 cases If there are any cases not sold by the end of the day, they are sold to a food processing company for $4 a case. The probability that daily demand will be 400 cases is 0.30, the probability that daily demand will be 450 cases is 0.45, and the probability that daily demand will be 500 cases is 0.25. There is no cost when FarnCo does not satisfy customer demands (a) Construct a decision table for this problem. (b) What do you recommend to maximize the expected proft?

Explanation / Answer

For Each level of Demand, we will identify level of production 400, 450 and 500 cases.

THe Given expected proft table fr Decision making is given below

Here Expected profit = 16 * Min{Prodcution ,Demand} - 7 * Production + 4 * (Min(Production,Demand)- Demand)

THe decision Table

HEre we can notice that any prodcution level in between 450 cases to 500 cases will produce same amount of profit

THe maximum profit here = $3870

(b) To earn maximum profit any production between 450 to 500 cases will be good for achieving maimum profit.

Production Production 400 450 500 Probability 400 450 500 Demand 400 3600 3450 3300 0.3 1080 1035 990 450 3600 4050 3900 0.45 1620 1822.5 1755 500 3600 4050 4500 0.25 900 1012.5 1125 Sum 3600 3870 3870

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.