A manufacturing company must devide whether to manufacture a

A manufacturing company must devide whether to manufacture a component part or purchase the component from a supplier. The resulting profit depends on the demand for the product. Demand can be low, medium or high. The company has estimated the payoff as follows. The payoffs for manufacturing will be -20, 40 and 100 under low, medium and high demands respectively. For purchasing, the pay offs will be 10, 45 and 80 for low, medium and high demands. What is the opportunity loss for the decision alternative Purchasing under the state of nature high demand?

A. 100
B. 20
C. 0
D. 80
E. None of the above

Solution

E) None of the above