Answered: Great 600(18) = 10800 Figure 9.5 0.45…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Question

The fixed cost of $6 million in the Acme problem is evidently not large enough to make Acme abandon the product at the current time. How large would the fixed cost need to be to make the abandon option the best
option? Explain how the decision tree, especially the version in Figure 9.5, answers this question easily.

Great
600(18) = 10800
Figure 9.5
0.45
Decision Tree for
New Product Model
7074
Fair
0.35
300(18) - 5400
Awful
0.20
Market product
-6000
90(18) = 1620
1074
Abandon product

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