Sec (2)

0peration
(1)

Decision Making
Expected value of a decision alternative is the sum of weighted
payoffs for the decision alternative.
E (q) = p q

ex :- If data are available for the quantity sold and the corres
ponding probability in one of the companies shown in the following table:

quantity 10 12 14

probability 0.3 0.4 0.3

The purchase price 20 and selling price 20 and selling price 30 pounds

a) Find the expected value of the units sold?

b) Find the amount to be Maintained ?

E (q) = p q
= (10) (0.3) + (12) (0.4) + (14) (0.3) = 12
Profit = selling price purchase price
= 30 20 = 10
 Sec (2)
0peration
(2)
Transportation problem

Supply 10 12 14 Demand

10 100 100 100

12 60 120 120

14 20 80 140

E (q = 10) = (100) (0.3) + (100) (0.4) + (100 x 0.3) = 100

E (q = 12) = (60) (0.3) + (120) (0.4) + (120 x 0.3) = 102

E (q = 14) = (20) (0.3) + (80) (0.4) + (140 x 0.3) = 80

q = 12 to be Maintained

ex :

Q 15 20 25

P 0.4 0.5 0.1

Purchase price 10 , selling price 20

 Sec (2)
0peration
(3)

1) E (q) = p.q
= (15) (0.4) + (20) (0.5) + (25) (0.1)
= 18.5
2) Profit = selling price purchase price
20 10 = 10

15 20 25

15 150 150 150

20 100 200 200

25 50 150 250

E (q = 15) = (150) (0.4) + (150) (0.5) + (150 x 0.1) = 150

E (q = 20) = (100) (0.4) + (200) (0.5) + (200 x 0.1) = 160

E (q = 25) = (50) (0.4) + (150) (0.5) + (250) (0.1) = 120

q = 20 to be Maintained

Q 10 11 12

P 0.4 0.5 0.1

Purchase price 15 , selling price 30