Solution

Published on February 2017 | Categories: Documents | Downloads: 15 | Comments: 0 | Views: 156
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a) Decision Tree

b) Optimal price is 50 rs. and optimal order quantity is 15 units.
c) EVPI when the selling price is 40 Rs./cake
When the perfect information is available it is best for Unnati to buy 20 cakes
when the demand is going to be 20 (happens in 40% of cases) and buy 30 cakes
when the demand is going to be 30 (happens in 60% of the cases). Hence EVPI
is:
EVPI =0.4*200+0.6*300 -200 =60 Rs.
d) EVPI when the selling price is 50 Rs./cake
When the perfect information is available it is best for Unnati to buy 15 cakes
when the demand is going to be 15 (happens in 60% of cases) and buy 25 cakes

when the demand is going to be 25 (happens in 40% of the cases). Hence EVPI
is:
EVPI =0.6*300+0.4*500 -300 =80 Rs.

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