attempting cide if it shou a new line of salad dressir Special company can test market the salad dressings 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 or not to introduce the salad dressings nationally. The probability of a positive test market result is estimated to be 0.6. Alternatively, the company cannot conduct the test market and make the decision to introduce the dressings or not. If the salad dressings are introduced nationally and are a success, the company estimates it will realize an annual profit of $1,600,000 while if the dressings fail it will incur a loss of $700,000. The company believes the probability of success for the salad dressings is 0.50 if it is introduced without the test market. If the company does conduct the test market and it is positive, the probability of successfully introducing the salad dressings increases to 0.8. If the test market is negative and the company introduces the salad dressings anyway, the probability of success drops to 0.30. Using decision-tree analysis, determine if the company should conduct the test market. The company conduct the test market.
attempting cide if it shou a new line of salad dressir Special company can test market the salad dressings 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 or not to introduce the salad dressings nationally. The probability of a positive test market result is estimated to be 0.6. Alternatively, the company cannot conduct the test market and make the decision to introduce the dressings or not. If the salad dressings are introduced nationally and are a success, the company estimates it will realize an annual profit of $1,600,000 while if the dressings fail it will incur a loss of $700,000. The company believes the probability of success for the salad dressings is 0.50 if it is introduced without the test market. If the company does conduct the test market and it is positive, the probability of successfully introducing the salad dressings increases to 0.8. If the test market is negative and the company introduces the salad dressings anyway, the probability of success drops to 0.30. Using decision-tree analysis, determine if the company should conduct the test market. The company conduct the test market.
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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Transcribed Image Text:Huntz Food Products is attempting to decide if it should introduce a new line of salad dressings called Special Choices. The company
can test market the salad dressings 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
or not to introduce the salad dressings nationally. The probability of a positive test market result is estimated to be 0.6. Alternatively.
the company cannot conduct the test market and make the decision to introduce the dressings or not. If the salad dressings are
introduced nationally and are a success, the company estimates it will realize an annual profit of $1,600,000 while if the dressings fail
it will incur a loss of $700,000. The company believes the probability of success for the salad dressings is 0.50 if it is introduced
without the test market. If the company does conduct the test market and it is positive, the probability of successfully introducing the
salad dressings increases to 0.8. If the test market is negative and the company introduces the salad dressings anyway, the probability
of success drops to 0.30.
Using decision-tree analysis, determine if the company should conduct the test market.
The company
✓ conduct the test market.
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