Scribd
Upload
306 views

Assignment

The document summarizes a case analysis for Freemark Abbey Winery on whether to immediately harvest Riesling grapes or leave them on the vines given uncertain weather conditions. Using a decision tree analysis, it calculates that the expected monetary value of harvesting now is $34,200, while harvesting later has an expected value of $39,240 but carries more risk of producing inferior wine in the case of a storm. Therefore, the recommended decision is to harvest the grapes now to eliminate risk and protect the winery's reputation, as the potential monetary gain of harvesting later does not outweigh the risks.

Uploaded by

Priyanka Mehar
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
306 views

Assignment

The document summarizes a case analysis for Freemark Abbey Winery on whether to immediately harvest Riesling grapes or leave them on the vines given uncertain weather conditions. Using a decision tree analysis, it calculates that the expected monetary value of harvesting now is $34,200, while harvesting later has an expected value of $39,240 but carries more risk of producing inferior wine in the case of a storm. Therefore, the recommended decision is to harvest the grapes now to eliminate risk and protect the winery's reputation, as the potential monetary gain of harvesting later does not outweigh the risks.

Uploaded by

Priyanka Mehar
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

Assignment

Structured Thinking and Problem Solving

-Priyanka Mehar

Case Analysis- Freemark Abbey Winery (Abridged)

Problem Statement

To decide whether to harvest Riesling Grapes immediately or to leave them on the vines in an
uncertain weather condition.

Analysis by decision tree

1. Harvesting currently ($2.85 per bottle). Total Revenue = 2.85x 12,000 = $34,200

2. Harvesting at a later stage


a) Storm (Probability = 0.5)
i) Botrytis formation (Probability = 0.4, Volume = 70%): Revenue = 8x0.7x12,000 = $67,200
ii) No Botrytis (Probability = 0.6, Volume = 100%):
Bottle Wine: Revenue = 2x12,000 = $24,000
Do not bottle wine: Revenue = 1x12,000 = $12,000

Hence Expected Monetary Value if storm = (0.4x67200) + (0.6x24000) = $ 41,280

b) No Storm (Probability = 0.5)


i) Good wine formed after vinification (40% probability): Revenue = 3.5x12,000
= $ 42,000
ii) Light wine formed after vinification (40% probability): Revenue = 3x12,000
=$ 36,000
iii) Low acid wine formed after vinification (20% probability): Revenue = 2.5x12,000
= $ 30,000
iv) Harvest now: Revenue = 2.85x12,000 = $34,200

Hence Expected Monetary Value if no storm = (0.4x42000) + (0.4x36000) + (0.2x30000)


= $ 37,200

Hence, Expected monetary value of harvesting later = $ 0.5x(41280+37200) = $ 39,240


Whereas, Expected monetary value of harvesting now = $ 34,200

Therefore, the decision should be to harvest now as there is difference of $5040 only in the two
values for revenues and it will eliminate the risk of bad produce and therefore bad reputation for
selling inferior product. And risk is more than the difference so it is not worth to take the risk.

You might also like