Use the decision tree tool to analyze

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Reference no: EM131694948

Tom Company makes tubes and wants to explore their operational options: either build a new factory, renovate the current factory or do nothing but maintain the current facility. The new factory will cost $1,000,000, will have a labor rate at $5 per tube, material costs of $40 per tube, and a scrap rate of 15%. The renovation option will cost $200,000, will have a labor rate of $20 per tube , material costs of $40 per tube and a scrap rate of 5%. If they do nothing to the factory the labor rate is $25 per tube, material is $40 per tube and scrap rate is 10%, additionally the current factory is at capacity without the renovation. Normally the sales volume is 20,000 units at $150 each; but there is a 30% chance that sales could go up 20%, and there is a 30% chance that sales will go down 30%. Overhead costs for each alternative is $600,000. Use the decision tree tool to analyze.

Reference no: EM131694948

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