Annual fixed costs are estimated

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The Battle Creek Breakfast Food Company has developed a new breakfast cereal which it is considering for full-scale production. Test market results have provided the following demand estimates: Demand in Cases _____Per Year_____ Probability 500,000. 15 1,000,000. 25 2,000,000 .45 5,000,000. 15 Development costs have totaled $1,200,000. If the new cereal goes into production, the company expects to receive $12 per case sold, variable production costs are $5 per case, and annual fixed costs are estimated at $5,000,000. Taking all relevant costs into consideration:

Draw a complete decision tree for this problem.

Reference no: EM131150544

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