Reference no: EM132581528

The manager of the greeting card section of KCC's department store is considering her order for a particular line of Christmas cards. The cost of each box of cards is P300; each box will be sold for P500 during the Christmas season. After Christmas, the cards will be sold for P200 a box. The card section manager believes that all leftover cards can be sold at that price. The estimated demand during the Christmas season for the line of Christmas cards, with associated probabilities, is as follows:

Demand (boxes)
Probability
25
.10
26
.15
27
.30
28
.20
29
.15
30
.10

a. Develop the payoff table for this decision situation.

b. Compute the expected value for each alternative and identify the best decision.

c. Compute the expected value of perfect information.

d. Assume that the probabilities of demand are no longer valid; the decision situation is now one without probabilities.

Determine the best number of boxes of cards to stock, using the following decision criteria.

i. Maximin

ii. Maximax

Minimax regret