Page 202 - P1 Integrated Workbook STUDENT 2018

Chapter 11

Example 2

Determine the optimal level of slices to be prepared each day using each
of the following criteria:

 Maximin

 Maximax

 Minimax regret.

Solution

80 slices 120 slices 160 slices 200 slices
Worst potential $40 $(20) $(80) $(140)
payout

Using Maximin, 80 slices should be prepared each day (this is the best result
in the worst case scenario).
80 slices 120 slices 160 slices 200 slices

Best potential $40 $60 $80 $100
payout

Using Maximax, 200 slices should be prepared each day (this is the best
result in the best case scenario).

Regret table (the difference between the highest and lowest pay out for each
level of demand):

80 slices 120 slices 160 slices 200 slices

40 slices $0 $60 $120 $180
50 slices $20 $0 $60 $120
60 slices $40 $20 $0 $60

70 slices $60 $40 $20 $0

Maximum regret $60 $60 $120 $180
Using maximum regret, 80 or 120 slices should be prepared each day. It is
best to choose the higher of these demand levels.

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