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Quantitative Analysis: Decision Trees

1. Daily demand for cases of Royal Cola soda at Helen's Food shop has always been 5, 6, or 7 cases. Develop a decision tree and decision table that illustrate the decision alternatives as to whether to stock 5, 6, or 7 Cases.

2. In problem 1, demand could be 5, 6, or 7 cases of Royal Cola per day. Thus 5, 6, or 7 cases should be stocked each day. Each case has a cost of $3 and selling price of $7. Helen may return cases not sold at the end of the day to the supplier and will refund be refunded the cost of each case except for a fee of $2 per case for handling and storage. Develop an appropriate decision table with the information that:

a. The marginal profit (Mp) of selling 1 case is the selling price minus the cost.(Mp=$7-$3=$4)

b.The marginal loss (ML) of not selling 1 case is the return cost of $2. (ML =$2)

Solution Summary

Instructions for developing a decision tree based on marginal profit and loss are provided.