Introduction to Management Science 12th Edition by Bernard Taylor

Exercise 60

The Palm Garden Greenhouse specializes in raising carnations that are sold to florists. Carnations are sold for $3.00 per dozen; the cost of growing the carnations and distributing them to the florists is $2.00 per dozen. Any carnations left at the end of the day are sold to local restaurants and hotels for $0.75 per dozen. The estimated cost of customer ill will if demand is not met is
$1.00 per dozen. The expected daily demand (in dozens) for the carnations is as follows:
a. Develop the payoff table for this decision situation.
b. Compute the expected value of each alternative number of (dozens of) carnations that could be stocked and select the best decision.
c. Construct the opportunity loss table and determine the best decision.
d. Compute the expected value of perfect information.