NAME: RHEALYN JANE C.

MIRAFLORES BSA401A

07 Task Performance 1

Case 1: Expected Value

D P Dx5 D x 5x P
400 20% 2,000 400
500 60% 2,500 1,500
700 20% 3,500 700
100% 2,600

EV for Special Contract

Special Contract
Demand P 500 700 900
400 20% 3,500 4,100 4,700
500 60% 4,000 4,600 5,200
700 20% 5,000 5,600 5,200
100% 4,100 4,700 5,100

Answer: It is beneficial to enter into a fixed contract because the EV without a fixed
contract is much lower than the three (3) options.
The highest EV among the three (3) options is a 900-unit Special Contract, which would
yield an EV of P 5,100.

Case 2: Maximin
Special Contract
Demand 500 700 900
400 3,500 4,100 4,700
500 4,000 4,600 5,200
700 5,000 5,600 5,200

Answer: Using maximin, we choose the maximum income among the least achievable
condition. In this case, we choose the lowest income for each of the contracts. And the
highest among these is P 4,700 under a 900-unit contract. Therefore, we choose the
900-unit contract, as we are guaranteed this amount.
Case 3: Maximax
Special Contract
Demand 500 700 900
400 3,500 4,100 4,700
500 4,000 4,600 5,200
700 5,000 5,600 5,200

Answer: Using maximax, we choose the maximum income among the maximum
achievable condition. In this case, we choose the maximum income for each of the
contracts. And the highest among these is P 5,600 under a 700-unit contract. Therefore,
we choose the 700-unit contract.

Case 4: Minimax Regret

Special Contract
Demand 500 700 900
400 1,200 600 -
500 700 600 -
700 600 - 400

Answer: The least among these three (3) is P 400. Therefore, we choose contract 900.

Case 5: Value of Perfect information

EV of no perfect information has been determined from the previous case is P 5,100
(900 unit)
EV of perfect information would be calculated by choosing the highest profit per
demand, as follows: 4,700 x 20% + 5,200 x 60% + 5,600 x 20% = 5,180. Having perfect
information would allow Mr. X factory to select the highest profit.
Special Contract
Demand 500 700 900
400 3,500 4,100 4,700
500 4,000 4,600 5,200
700 5,000 5,600 5,200
VOPI = 5,180 – 5,100 = 80. This is the maximum amount that Mr. X factory should pay
for the survey.