# One product that brilliant color supplies is bc 6

• Test Prep
• lekhoa.2910
• 6
• 97% (37) 36 out of 37 people found this document helpful

This preview shows page 5 - 6 out of 6 pages.

photographic stores to process 35mm film. One product that Brilliant Color supplies is BC-6. JohnKubick, president of Brilliant Color, normally stocks 11, 12, or 13 cases of BC-6 each week. For eachcase that John sells, he receives a profit of \$35. Like many photographic chemicals, BC-6 has a veryshort shelf life, so if a case is not sold by the end of the week, John must discard it. Since each casecosts John \$56, he loses \$56 for every case that is not sold by the end of the week. There is aprobability of 0.45 of selling 11 cases, a probability of 0.35 of selling 12 cases, and a probability of0.2 of selling 13 cases.(a) Construct a decision table for this problem. Include all conditional values and probabilities in thetable.(b) What is your recommended course of action?(c) If John is able to develop BC-6 with an ingredient that stabilizes it so that it no longer has to bediscarded, how would this change your recommended course of action?Solution:(a) We have the decision table as following:STOCKSTOCK SOLD11 cases12 cases13 cases11 cases12 cases13 casesProbability11*\$35 = \$38511*\$35 – 1*\$56 = \$32911*\$35 – 2*\$56 = \$273 0.4511*\$35 = \$38512*\$35 = \$42012*\$35 – 1*\$56 = \$3640.3511*\$35 = \$38512*\$35 = \$42013*\$35 = \$4550.2(b) We have:EMV(11 cases)= (0.45)*(\$385) + (0.35)*(\$385) + (0.2)*(\$385) = \$385EMV(12 cases)= (0.45)*(\$329) + (0.35)*(\$420) + (0.2)*(\$420) = \$379.05EMV(13 cases)= (0.45)*(\$273) + (0.35)*(\$364) + (0.2)*(\$455) = \$341.25Based on the Maximize Expected Monetary Value model, John should choose to sell 11 cases becauseit has the highest EMV.(c) If John is able to develop BC-6 with an ingredient that stabilizes it so that it no longer has to bediscarded, we have the decision table as following:STOCKSTOCK SOLD11 cases12 cases13 cases11 cases12 cases13 casesProbability11*\$35 = \$38511*\$35 = \$38511*\$35 = \$385 0.4511*\$35 = \$38512*\$35 = \$42012*\$35 = \$4200.3511*\$35 = \$38512*\$35 = \$42013*\$35 = \$4550.2We have:EMV(11 cases)= (0.45)*(\$385) + (0.35)*(\$385) + (0.2)*(\$385) = \$385
LE ANH KHOA – BABAIU14124EMV(12 cases)= (0.45)*(\$385) + (0.35)*(\$420) + (0.2)*(\$420) = \$404.25EMV(13 cases)= (0.45)*(\$385) + (0.35)*(\$420) + (0.2)*(\$455) = \$411.25In this situation, based on the Maximize Expected Monetary Value model, John should choose to sell13 cases because it has the highest EMV.
• • • 