Use This Information to Answer the Following Questions

question 2

Essay

Use this information to answer the following questions.
A bakery must decide how many pies to prepare for the upcoming weekend.The bakery has the option to make 50,100,or 150 pies.Assume that demand for the pies can be 50,100,or 150.Each pie costs $5 to make and sells for $7.Unsold pies are donated to a nearby charity center.Assume that there is no opportunity cost for lost sales.
-Refer to the information above.Assume that the bakery (see problem 7)has obtained the following probability information regarding demand for the pies: P(50)= 0.3,P(100)= 0.5,and P(150)= 0.2.
a.Develop a decision tree for this problem.
b.Analyze the decision tree and determine which alternative should be chosen.
c.Using the expected opportunity loss (EOL)criterion,which alternative should be chosen?

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Definitions:

Markov Model

A stochastic model that describes a sequence of possible events in which the probability of each event depends only on the state attained in the previous event.

Linear Programming

A mathematical method used to achieve the best outcome in a mathematical model whose requirements are represented by linear relationships.

Mathematical Procedure

A set of formal rules or operations for solving problems or reaching conclusions, often involving calculations.

Skills Inventory

An individualized personnel record held on each employee except those currently in management or professional positions.