A company purchases its merchandise for $10 and sells for each item for $20. The pay-off table for the problem is given below.
| |
Demand for Item
|
|
Alternative
|
Low
|
Medium
|
High
|
|
Do nothing
|
0
|
0
|
0
|
|
Order Low
|
30,000
|
30,000
|
30,000
|
|
Order Medium
|
10,000
|
50,000
|
40,000
|
|
Order High
|
-10,000
|
40,000
|
80,000
|
|
Probability
|
0.3
|
0.3
|
0.4
|
What is the decision based on each of the following criteria?
(a) EMV approach