**Case Study: Decision Analysis for Introducing Special Choices Salad Dressings***Kroft Food Products* is evaluating the introduction of a new line of salad dressings named *Special Choices*. The company has two primary options: conduct a test market in selected geographic areas or launch the product nationally without testing. The test market incurs a cost of $150,000.**Test Market Analysis**- **Probability of Positive Test Market**: 0.6- **Cost of Test Market**: $150,000If the test market is favorable, the company can proceed with a national launch. Without testing, the company must rely on estimated probabilities.**National Introduction Outcomes**1. **Without Test Market**: - **Success**: 50% probability, resulting in an annual profit of $1.6 million. - **Failure**: 50% probability, resulting in a loss of $700,000.2. **With Positive Test Market**: - Probability of Success increases to 0.8.3. **With Negative Test Market**: - If introduced anyway, probability of success drops to 0.3.**Decision Problem**Using decision tree analysis, determine if conducting the test market is financially advantageous, considering the probabilities of success and failure under different scenarios.

The tree is comprised of a progression of nodes and branches. At the primary hub on the left, the…

Answered: Kroft Food Products is attempting to…

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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