Daily sales of bread by Salvador Monella's Baking Company follow the historical pattern shown in the table below. It costs the bakery 50 cents to produce a loaf of bread, which sells for 95 cents
Any bread unsold at the end of the day is sold to the parish jail for 25 cents per loaf. Construct the decision table of conditional payoffs. How many loaves should Sal bake each day in order to maximize contribution?
Demand 400 500 600 700 800
Probability .20 .20 .40 .15 .05
The Excel OM decision table and solution appear below. The best expected value is $228, which occurs with the decision to bake 600 loaves.
Profit Sell 400 Sell 500 Sell 600 Sell 700 Sell 800 EMV
Probability 0.2 0.2 0.4 0.15 0.05
Bake 400 180 180 180 180 180 180
Bake 500 155 225 225 225 225 211
Bake 600 130 200 270 270 270 Maximum 228
Bake 700 105 175 245 315 315 217
Bake 800 80 150 220 290 360 195.5
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