Jack Foods Inc. assembles food packages that can be sent overseas during the holiday season. Each package sells for $48 and costs $22 to put together. The company plans to assemble 100, 200, or 300...

Jack Foods Inc. assembles food packages that can be sent overseas during the holiday season. Each package sells for $48 and costs $22 to put together. The company plans to assemble 100, 200, or 300 packages this year. The probabilities associated with selling each of these quantities are as follows: P (100) = 0.11, P (200) = 0.60 and P (300) = 0.29

Unsold packages are sold at 30% of the regular price. If more packages are needed than were assembled, Jack Food Inc. will assemble them to ensure no loss of customer goodwill. However, a maximum of 50 extra packages can be assembled at a cost of $26.00 per package. However, the sale price remains at $48 per package. The company needs to determine how many food packages to assemble to maximize profit.

a.Using the EMV criterion, how many food packages should the company assemble?
5 marks

b. What is the expected value of perfect information?2 marks