Solution-Draw a decision tree, According to his friend,

Draw a decision tree

Assignment Help Cost Accounting

Reference no: EM133085347

Question - Solve the given problem. A businessman must decide whether to open a new mini grocery branch or simply extend the number of hours of its operation on its existing branch with a payoff of P150,000. According to his friend, demand at the new location can either be low or high, which the probabilities are estimated to be 35% and 65%, respectively. If a new branch is opened and demand proves to be high, the businessman may choose to operate 24 hrs. (payoff is P350,000) or to operate 12 hrs. (payoff is P200,000). If a new branch is opened and demand proves to be low, there is no need to operate on a 24-hr basis but instead, they will just stick to 12-hr operation with a payoff of P100,000 or enhance marketing strategy through advertising. Projected response to advertising may either be favorable or not favorable, with estimated probabilities of 40% and 60%, respectively. If demand is favorable, the payoff grows to P310,000 and if the response is unfavorable, the payoff is P120,000. The cost of advertising is P45,000.

a. Draw a decision tree.

b. Determine the expected value for each decision and event nodes.

c. Which alternative is the best for the businessman?

Reference no: EM133085347

Questions Cloud

Identify the sources of industry profitability : Perform a 5 forces analysis of Feedzai, federal crime solutions to clearly identify the sources of industry profitability and the overall attractiveness of the

What is the amount that should be charged : If the overtime premium is charged to manufacturing overhead, what is the amount that should be charged to Work in Process account

Most significant aspect of a compliance plan : The Office of Inspector General (OIG) has established a set of guidelines (such as auditing, monitoring, internal controls, sampling, due diligence, and standar

Emerging trends in beverage service : Considering the past, current and emerging trends in beverage service in the Australian liquor industry what would you consider has shaped the industry over the

Draw a decision tree : According to his friend, demand at the new location can either be low or high, which the probabilities are estimated to be 35%. Draw a decision tree

Causes of changing industry and competitive conditions : Industry conditions change because important forces are driving industry participants to alter their actions. The driving forces in an industry are the major un

Presence of counterproductive cultural traits : Industry conditions change because important forces are driving industry participants to alter their actions. The driving forces in an industry are the major un

How do you think disney recognizes the revenue : How do you think Disney recognizes the revenue from these theme park ticket sales? Discuss both types of tickets in your answer

Create large amounts of e-waste : Business can create large amounts of e-waste. What should a business do, to reduce this e-waste, and green footprint?

User Account

All Pages

Draw a decision tree

Reference no: EM133085347

Reference no: EM133085347

Questions Cloud

Reviews

Write a Review

Cost Accounting Questions & Answers

Cost accounting assignment

Prepare the journal entries

Advise as to the liability of all the parties

Prepare revenues budget

Effect of exchange rate changes on cash and cash

Corporate governance

Cost-benefit analysis

Non-annual interest rates and annuities

Job costing in service organizations

Accounting for bad debt expense

Accounting and partnership problems

Development of relevant cash flows

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT