Flora Co sells bunches of fresh flowers which have a limited shelf life so forecasting sales demand is extremely important for maximising profits. Quarter 1 Quarter 1 contains a national holiday and as a result sales of a particular red flower are usually very high. Sales of the red flower will depend on market conditions. After the national holiday there will be no demand for the red flowers and they will be thrown away. Flora Co must decide whether to purchase 250 bunches, 400 bunches or 500 bunches of the red flowers from its supplier for re-sale to its customers. The following payoff table has been produced: Market conditions Poor Good Excellent Expected value Probability 0.20 0.25 0.55 Number of bunches to be bought from supplier 400 250 $2,400 $2,400 $2,400 $2,400 $900 $3,900 $3,900 $3,300 500 ($100) $2,900 $4,900 $3,400

Practical Management Science
6th Edition
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Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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If Flora Co adopts the minimax regret approach, how many bunches of flowers will it buy from its
supplier in Quarter 1?
bunches
Transcribed Image Text:If Flora Co adopts the minimax regret approach, how many bunches of flowers will it buy from its supplier in Quarter 1? bunches
Flora Co sells bunches of fresh flowers which have a limited shelf life so forecasting sales demand is
extremely important for maximising profits.
Quarter 1
Quarter 1 contains a national holiday and as a result sales of a particular red flower are usually very high.
Sales of the red flower will depend on market conditions. After the national holiday there will be no demand
for the red flowers and they will be thrown away. Flora Co must decide whether to purchase 250 bunches,
400 bunches or 500 bunches of the red flowers from its supplier for re-sale to its customers.
The following payoff table has been produced:
Market conditions
Poor
Good
Excellent
Expected value
Probability
0.20
0.25
0.55
Number of bunches to be bought from supplier
400
$900
$3,900
$3,900
250
$2,400
$2,400
$2,400
$2,400
$3,300
500
($100)
$2,900
$4,900
$3,400
Transcribed Image Text:Flora Co sells bunches of fresh flowers which have a limited shelf life so forecasting sales demand is extremely important for maximising profits. Quarter 1 Quarter 1 contains a national holiday and as a result sales of a particular red flower are usually very high. Sales of the red flower will depend on market conditions. After the national holiday there will be no demand for the red flowers and they will be thrown away. Flora Co must decide whether to purchase 250 bunches, 400 bunches or 500 bunches of the red flowers from its supplier for re-sale to its customers. The following payoff table has been produced: Market conditions Poor Good Excellent Expected value Probability 0.20 0.25 0.55 Number of bunches to be bought from supplier 400 $900 $3,900 $3,900 250 $2,400 $2,400 $2,400 $2,400 $3,300 500 ($100) $2,900 $4,900 $3,400
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