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MNGT 21 - Management Science Decision Tree

The document presents two decision tree scenarios for a manager. The first scenario involves deciding whether to prepare a bid that has a 50% chance of being awarded, which could result in earning $100,000 or paying a $8,000 fine. The second scenario involves deciding whether to purchase a patent for $50,000 to develop a new product using either a modern method with 60% success chance or traditional method with 70% success chance, which could earn $500,000 if successful.

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Klaryz D. Mirandilla
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667 views1 page

MNGT 21 - Management Science Decision Tree

The document presents two decision tree scenarios for a manager. The first scenario involves deciding whether to prepare a bid that has a 50% chance of being awarded, which could result in earning $100,000 or paying a $8,000 fine. The second scenario involves deciding whether to purchase a patent for $50,000 to develop a new product using either a modern method with 60% success chance or traditional method with 70% success chance, which could earn $500,000 if successful.

Uploaded by

Klaryz D. Mirandilla
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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MNGT 21 – Management Science

Decision Tree

1. A manager has to decide whether to prepare a bid or not. It costs P5,000 to prepare
the bid. If the bid is submitted, the probability that the contract will be awarded is
50%. If the company is awarded the contract, it may earn an income of P100,000 if it
succeeds, or pay a fine of P8,000 if it fails. The probability of success is estimated to
be 80%. Should the manager prepare a bid? 

Mr. del Mundo, the president of RFC Corporation is faced with deciding whether to
purchase a patent to develop a new product or not. If the company purchases the
patent, it should develop the product. The selling price of the patent if P50,000. There
are two ways of developing the product: the Modern Method and the Traditional
Method. It costs P20,000 to use the Modern Method, and P15,000 for the traditional
Method. The proby of success in the Modern Method is 60%, while it is 70% for the
Traditional Method. If the product is successfully developed, it will an income of
P500,000. Should the company purchase the patent? If so, what method of
development should be used?

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