# Quantitative analysis and demand

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Adele Weiss manages the campus flower shop. Flowers must be ordered three days in advance from her supplier in Mexico. Advance sales are so small that Weiss has no way to estimate the demand for the red roses. She buys roses for $15 per dozen and sells them for $40 per dozen. The pay-off table for the problem is given below.

Demand for Red Roses

Alternative Low (25 dozen) Medium (60 dozen) High (130 dozen)

Do nothing 0 0 0

Order 25 dozen 300,000 300,000 300,000

Order 60 dozen 100,000 600,000 600,000

Order 130 dozen -100,000 400,000 900,000

Probability 0.3 0.4 0.3

What is the decision on demand based on each of the following criteria? Show work in making the decision for each criterion.

a) EMV approach

b) EOL approach

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##### Solution Summary

Solution describes the steps to determine the best decision based on each of the given criteria.

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Please refer attached file for better clarity of tables.

a) EMV Approach

Low Medium High EMV

25 Doz 60 Doz 130 Doz

Do nothing 0 0 0 0

Order 25 Doz 300000 300000 300000 300000

Order 60 Doz 100000 600000 600000 450000

Order 130 Doz -100000 400000 900000 400000

Probability 0.3 0.4 0.3

EMV for "Do nothing"=0.3*0+0.4*0+0.3*0=0

EMV for "Order 25 Doz."=0.3*300000+0.4*300000+0.3*300000=$300,000

EMV for "Order 60 Doz."=0.3*100000+0.4*600000+0.3*600000=$450,000

EMV for "Order 130 ...

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- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India

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