A firm produces perishable food at the cost of 25 per case

Reference no: EM13596330

A firm produces perishable food at the cost of $25 per case and in batches of 100 cases. It sells the product to a grocery chain at $30 per case. The grocery chain buys the products in lots of 100, 200, or 300 cases every morning, but does not specify its requirements to the firm in time for the production run. If the demand is less than the production, the excess produce is lost. If the demand is more than the production, the firm has agreed to satisfy the excess demand with a special production run at a cost of $35 per case. The selling price, however, is always at $30 per case. The firm has estimated that the demand is for 100 cases 20% of the days, for 200 cases 50% of the days and for 300 cases the remaining 30% of the days.

(a) Set up the payoff table for this problem.

(b) What should be the firm's production decision if the objective is to maximize expected payoff?

(c) How much discount should the firm be willing to offer the grocery chain for specifying the demand in time for each day's production run? Assume that the distribution for demand remains unchanged at 0.2, 0.5, and 0.3 for 100, 200, and 300 cases respectively.

(d) Compose a short memo for the CEO of the firm to explain why you should offer the grocery chain the per case discount determined in part (c).

Reference no: EM13596330

Questions Cloud

Determine the net advantage or disadvantage profit increase : problem 5 20 points amherst produces a single product. the companys march 2010 income statement is as follows sales

We will make about 350 ml of approx 02 m naoh aq solution : we will make about 350 ml of approx. 0.2 m naoh aq solution by diluting 6 m naoh aq. calculate the approximate volume

The monitor estimates this value by calculating the slope : question a cardiac monitor is used to measure the heart rate of a patient after surgery. it compiles the number of

Can someone help me with this financial accounting tools : can someone help me with this. financial accounting tools for business decision making 6th edition. kimmel weygandt

A firm produces perishable food at the cost of 25 per case : a firm produces perishable food at the cost of 25 per case and in batches of 100 cases. it sells the product to a

Find the rate at which the area of the triangle is changing : a ladder 25 feet long is leaning against the wall of a house. the base of the ladder is pulled away from the wall at a

On nov 15 2010 betty corp accepted a not receivable in : on nov. 15 2010 betty corp accepted a not receivable in place of an outstanding accounts receivable in the amount

Suppose you copy a drawing of a polygon with the given size : suppose you copy a drawing of a polygon with the given size factor. how will the side lengths angle measures and

The 12 water of hydration are hydratedstrongly attracted to : the 12 water of hydration are hydratedstrongly attracted to the metal ions of the crystallin alum structure. are the

User Account

All Pages