Cashman Co. will be leasing a new copier and is considering four plans. The company has determined it will make 12,600, 14,400, 16,200, 18,000, 19,800, or 21,600 copies per month with probabilities of .05, .10, .15, .25, .25, and .20 respectively.
a. Construct a monthly payoff table for Cashman in terms of costs.
b. What is the optimal plan using the expected value approach? (Hint: This is a cost minimization problem.)

Question

Cashman Co. will be leasing a new copier and is considering four plans. The company has determined it will make 12,600, 14,400, 16,200, 18,000, 19,800, or 21,600 copies per month with probabilities of .05, .10, .15, .25, .25, and .20 respectively.  
a. Construct a monthly payoff table for Cashman in terms of costs.
b. What is the optimal plan using the expected value approach? (Hint: This is a cost minimization problem.)

Quizplus · Accepted Answer

The Answer of Cashman Co. will be leasing a new copier and is considering four plans. The company has determined it will make 12,600, 14,400, 16,200, 18,000, 19,800, or 21,600 copies per month with probabilities of .05, .10, .15, .25, .25, and .20 respectively.  
a. Construct a monthly payoff table for Cashman in terms of costs.
b. What is the optimal plan using the expected value approach? (Hint: This is a cost minimization problem.)