Purchase Solution

Decision Tree Analysis

Not what you're looking for?

Ask Custom Question

Kroft Food Products is attempting to decide whether it should introduce a new line of salad dressing called Special choices. The company can test market the salad dressing in selected geographic areas or bypass the test market and introduce the product nationally. The cost of the test market is $150,000. If the company conducts the test market, it must wait to see the results before deciding whether to introduce the salad dressings nationally. The probability of a positive test market result is estimated to be 0.6. Alternatively, the company can decide not to conduct the test market and go ahead and make the decision to introduce the dressings or not. If the salad dressings are introduced nationally and are a success; the company estimates that it will realize an annual profit of 1.6 million, whereas if the dressings fail, it will incur a loss of $700,000.
The company believes the probability of success for the salad dressing is 0.50 if they are introduced without the test market. If the company does conduct the test market and it is positive, then the probability of successfully introducing the salad dressings increases to 0.8. If the test market is negative and the company introduces the salad dressing anyway, the probability of success drops to 0.30.

Using decision tree analysis, determine whether the company should conduct the test market.

Purchase this Solution

Solution Summary

A Complete, Neat and Step-by-step Solution is provided in the attached file.

Purchase this Solution


Free BrainMass Quizzes
Measures of Central Tendency

Tests knowledge of the three main measures of central tendency, including some simple calculation questions.

Know Your Statistical Concepts

Each question is a choice-summary multiple choice question that presents you with a statistical concept and then 4 numbered statements. You must decide which (if any) of the numbered statements is/are true as they relate to the statistical concept.

Measures of Central Tendency

This quiz evaluates the students understanding of the measures of central tendency seen in statistics. This quiz is specifically designed to incorporate the measures of central tendency as they relate to psychological research.

Terms and Definitions for Statistics

This quiz covers basic terms and definitions of statistics.