Assignment Task:
Conrad's Cakes specializes birthday cakes. A birthday cake costs $25 each to make and sells for a price of $35 for the next two days while it is still fresh. All cakes not sold during the ?rst two days are discounted and are eventually sold for $15 each.
Conrad's demand is assumed to be either 10, 20, 30, or 40 cakes for the two-day period with probabilities 0.10, 0.20, 0.40, and 0.30, respectively. Conrad seeks to determine how many cakes to bake every other day by choosing from the alternatives of 10, 20, 30, or 40 cakes.
Which of the following statements are true when applying the aggressive (maximax) decision criterion?
- The value associated with the decision to bake 30 cakes is $400.
- The value associated with the decision to bake 2O cakes is $150.
- Exactly two answers are correct.
- The best decision is to bake 30 cakes under this decision rule.
- The value associated with the decision to bake 10 cakes is $100.