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Adele Weiss manages the campus flower shop. Flowers must be ordered three days in advance from her supplier in Mexico. Advance sales are so small that Weiss has no way to estimate the demand for the red roses. She buys roses for $15 per dozen and sells them for $40 per dozen. Pay-off table for the problem is given below.
Demand for Red Roses
Alternative
Low (25 dozen)
Medium (60 dozen)
High (130 dozen)
Do nothing
0
Order 25 dozen
300,000
Order 60 dozen
100,000
600,000
Order 130 dozen
-100,000
400,000
900,000
Probability
0.3
0.4
What is the decision based on each of the following criteria? Show work in making the decision for each criterion.
a) EMV approach
b) EOL approach
Use the tables given below.
a) EMV Approach
EMV
b) EOL Approach
EOL
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