A large distributor of food related items is considering setting up a new distri

Question

A large distributor of food related items is considering setting up a new distribution centre. Based on its previous experience, it had the following information. Payoffq per month in $000 (thousand) Decision Alternative for Distribution Center Small Centre: S Medium Centre: M Large Centre: L Probability: LD: Low Demand 25 20 -30 0.2 MD: MediumHD: High Demand 40 90 80 0.5 Demand 40 65 150 0.3 Based on the above data, explain what your decisions would be by calculating the following criteria for profitability:

Explanation / Answer

v.

VI.

VII.

Viii.

LD MD HD Expected Payoff S 25 40 40 37 M 20 90 65 68.5 L -30 80 150 79 Best option P 0.2 0.5 0.3

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