Jessica has been awarded a contract to produce dresses of
her design by a small retail chain. The
chain will take delivery of 50 dresses right now. But future releases will depend on actual
sales.
The chain has provided a set of estimates of sales for the upcoming year:
|
Demand |
# of Dresses * |
Probability |
|
Low |
1000 |
30% |
|
Medium |
2000 |
40% |
|
High |
3000 |
30% |
* includes the 50 already released.
Jessica has 3 options:
A: make the dresses herself, no fixed costs, profit will be $10.00 per dress.
B: buy equipment and hire part time help; equipment costs will be $5,000, profit per dress will be $15.00.
C: contract out to a sewing shop, up front is a one time cost of $10,000, profit per dress will be $20.00.
Question: which option should Jessica select?
Payout table and Decision Tree are required.
Hint: Decision tree will have 3 major branches and each major branch will have 3 branches.
Field of study:
No answers yet