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Dear Sir,
I have a problem tackling this question and its kind of different from the free lectures.
the question is divided into three parts a) Construct a pay-off table to show all the possible profit outcomes. b) Decide the level of cement production the company should based on the following decision rule i) Maximin ii) Maximax iii) Expected Value (you must justify your decision under each rule showing all necessary calc.) c) Describe the ‘maximin’ and ‘expected value’ decision rules, explaining when they might be used and the attitudes of the decision markers who might use them.
The case study is quite long however some important aspects of the case study is
Weather Probability Demand
Good 25% 350,000 bags
Average 45% 280,000 bags
Poor 30% 200,000 bags
Each bag of cement sells for $9 and costs $4 to make. If cement is unsold at the end of the year, it has to be disposed of at a cost of $0.50/bag.Thanks
It is no different in approach at all to what is in the lectures. Every exam question is slightly different – the examiner wants to check that you understand and that you are not simply learning rules.
Maybe what is causing you the problem is that if the cement is unsold then they have to pay $0.50 to remove it (they do not receive $0.50).
You obviously have an answer to the question (in the same book in which you have the question), so do ask again if there is something in the answer that you do not understand.
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