SEMESTER FALL 2011
Production operations Management ()
Assignment No. 02
Due Date: 28.12.2011 Marks: 30
Assignment:
Mr. Akbar Ali is working as a manager in a super store. In normal conditions he has to order eggs at
least three days in advance from his supplier in Lahore. As winter season has approached and the
sales are expected to increase rapidly, so he has to manage the inventory of the store very effectively.
This year due to some unknown reasons the sales of the eggs are fluctuating so much that he has no
way to estimate the probability of low (125 dozen), medium (800 dozen), or high (1750 dozen)
demand for eggs in the peak season. He buys eggs for Rs-100 per dozen and sells for Rs-250 per
dozen.
Mr. Akbar Ali is very confused from this situation, as he has to meet the demand of customers in the
upcoming months and increase the revenue of the store as well while keeping the inventory at lowest
possible level. The owner of the store asked Mr. Akbar to develop a Pay Off table from given data
and determine the best alternatives from given scenario under the following two conditions:
• Certainty in Demand
• Uncertainty in Demand
Mr. Akbar is worried in this situation, as he does not know how to prepare the payoff table and how
he can use the best alternatives under certainty and uncertainty in demand. Based on his knowledge
and the past experiences Mr. Akbar prepared the payoff table given as:
Orders
Alternative Low (125 dozen) Medium (800 dozen) High (1750 dozen)
Order 125 dozen Rs-15,625 Rs-15,625 Rs-15,625
Order 800 dozen 100,000 640,000 1,420,000
Order 1750 dozen 218,750 1400,000 3,062,500
After in depth analysis of the payoff table the owner of the shop is not satisfied from Mr. Akbar’s
efforts. He immediately ordered him to come up with more precise, reliable and accurate analysis.
You being the student of POMA assist Mr. Akbar under this radical condition. Your calculation and
analysis must cover the following aspects of the given scenario.
1. Correct Payoff Table Marks (10)
2. Decision Making under Certainty Marks (10)
3. Decision Making under Uncertainty Marks (10)
Instructions:
Please read the following instructions carefully before preparing the assignment solution:
• Support your analysis with computations and recommendations.
• Supposition must be logically justified and explained in answer.
• Don’t copy from blogs and internet it will be marked zero.
• Use proper working where necessary.
• Calculation must be clear and concise.
