00:01
To analyze the decision -making problem faced by abcd manufacturing company, we can construct a payoff table with the profits corresponding to each combination of demand and decision alternative.
00:15
So we have the demand being low, moderate, and high.
00:28
So for the demand, we have d1, d2, and d3.
00:34
Now for low, we have 200, 150, negative 200, and negative 500.
00:48
For moderate, we have 100, 100, 200, and negative 200.
00:59
Now for high, we have negative 200, 0, 300, and 900.
01:09
So given that the probabilities for each demand are 0 .2, 0 .5, and 0 .3, respectively, we can calculate the expected profit for each decision alternative using the expected value approach.
01:26
So for d1, we have 0 .2 times 200 plus 0 .5 times 100 plus 0 .3 times negative 200, which equals 40 plus 50 minus 60, which equals $30 ,000.
01:49
For d2, we have 0 .2 times 150 plus 0 .5 times 100 plus 0 .3 times 0, which equals 30 plus 50 plus 0, which equals $80 ,000.
02:12
For d3, we have 0 .2 times negative 200 plus 0 .5 times 200 plus 0 .3 times 300, which equals negative 40 plus 100 plus 90, which equals $150 ,000...