Earl Shell owns his own Sno-Cone business and lives 30 miles…

Earl Shell owns his own Sno-Cone business and lives 30 miles from a beach resort. The sale of Sno-Cones is highly dependent upon his location and upon the weather. At the resort, he will profit $110 per day in fair weather, $20 per day in foul weather. At home, he will profit $70 in fair weather, $50 in foul weather. Assume that on any particular day, the weather service suggests a 60% chance of fair weather. If Earl could find a forecaster who could tell him each day if it would be fair or foul weather how much would he be willing to pay for that perfect information? The payoff table is   Profit Fair weather Foul weather   Probability = 0.6 Probability = .4 Sell at the resort 110 20 Sell at home 70 50

Bratt’s Bed and Breakfast, in a small historic New England t…

Bratt’s Bed and Breakfast, in a small historic New England town, must decide how to subdivide (remodel) the large old home that will become an inn. There are three alternatives: Option A would modernize all baths and combine rooms, leaving the inn with four suites, each suitable for two to four adults. Option B would modernize only the second floor; the results would be six suites, four for two to four adults, and two for two adults only. Option C (the status quo option) leaves all walls intact. In this case, there are eight rooms available, but only two are suitable for four adults, and four rooms will not have private baths. Below are the details of profit and demand patterns that will accompany each option. Which option has the highest expected value?     Annual profit under various demand patterns   High p Low p A (Modernize all) $90,000 .5 $25,000 .5 B (Modernize 2nd) $80,000 .4 $70,000 .6 C (Status Quo) $60,000 .3 $55,000 .7

Tiny Rick industries packages two product in their Florida P…

Tiny Rick industries packages two product in their Florida Plant. Pancake’s Pancake mix (Mix) and Pickle Rick’s seasoning salt (Salt).  Making 1 batch of  Mix requires 3 hours of mixing time and 1 hour of packaging time. Making 1 batch of Salt Requires 5 hours of mixing and 2 hours of packaging time.  There is a total weekly allotment of 40 hours of mixing and 15 hours of packaging.  Demand for the mix will not exceed 5 batches per week and demand for the salt will not exceed 6 batches per week.  Each batch of mix or salt is expected to generate profit of $120 and $400, respectively. What is the expected weekly profit if Rick optimizes his production based on profit maximization?