Recommended production decision using the optimistic

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Blue Skies is a Ghana company that manufactures perishable fresh fruit primarily for supermarket stores in Europe. The business for Mango juice is such that production has to occur before demand for a day is known. It cost GHS 2.0 to manufacture a 330 ml bottle of Mango juice which it sells to its international customers at GHS 3.0 per bottle. Any leftover demand is resold to the local market the next day at a GHS 1.0. Because of the price discount, the company is able to sell any leftover from the previous day. Since the company value its international customers highly, it charges itself GHS 0.4 per bottle in lost sales for any international demand not met. The company has been tracking demand for Mango juice from its international customers for some time now, and anticipates a day's demand to be either 10000, 14000, or 18000 units with respective probabilities of 0.3, 0.5, and 0.2. With this assumption, Blue Skies estimated its payoff for the three production options. For example, for the production, demand combination of (14000, 10000), the payoff is = 3*10000+1*4000-2*14000-0.3*0 = 6000 If Blue Skies has no idea which of the three demands will occur, then the recommended production decision using the optimistic (i.e. maximax) criterion is to produce products at a total payoff of GHS.

Reference no: EM133242940

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