[Rst]

@Faye. now I am thinking about the matrix in light of TGee’s comment.
We correctly argue to subtract 20 instead of 5 per unit of over-production. However, in the first part of equation that I have wrote, we still include 25 contribution for over-produced units, which actually would not been earned if demand is less than production. Don’t know if I was clear enough?

[Rst]

Q3 matrix should look like this:

Profit = contribution (25usd) x no of produced units – (fixed cost) – scrapped units cost (accrd to demand)
fixed cost: 475K for 20K prod. 525K for above.
scrapped units cost (variable cost + utilization cost 5/unit): e.g. in case of 30K production but 20K demand = (30K x 25usd) – 525K – (10K x 20usd) = 25K

Demand Production 20K 25K 30K
20K *******************25K 0K 25K
25K *******************25K 100K 125K
30K *******************25K 100K 225K
Max *******************25 100 225
Min *******************25 0 25

For minimax regret payoff table should be constructed.

[Author]

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