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MBA Exam: Business Decision Analysis

Wilbert Lopez manages a growing water refilling station and is considering expanding. Marketing estimates a 40% chance of rapid population growth, 30% chance of slow growth, and 30% chance of stagnation. Expanding both sides yields the highest expected profit of P402,000. A shoe company developed a new bag design. They can produce 35,000, 55,000 or 75,000 units. There is a 40% chance of success selling all units produced, otherwise they can sell 45,000. Producing 75,000 units yields the highest expected profit of P1,300,000. The student constructed decision trees to analyze the expansion options for Wilbert and production levels for the shoe company

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302 views3 pages

MBA Exam: Business Decision Analysis

Wilbert Lopez manages a growing water refilling station and is considering expanding. Marketing estimates a 40% chance of rapid population growth, 30% chance of slow growth, and 30% chance of stagnation. Expanding both sides yields the highest expected profit of P402,000. A shoe company developed a new bag design. They can produce 35,000, 55,000 or 75,000 units. There is a 40% chance of success selling all units produced, otherwise they can sell 45,000. Producing 75,000 units yields the highest expected profit of P1,300,000. The student constructed decision trees to analyze the expansion options for Wilbert and production levels for the shoe company

Uploaded by

Abegail Panang
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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SAINT COLUMBAN COLLEGE

Pagadian City
--oOo--
GRADUATE SCHOOL

COMPREHENSIVE EXAMINATION FOR


MASTER IN BUSINESS ADMINISTRATION

GENERAL DIRECTIONS: Please give your answer to the questions comprehensively.

BA 206/PA 207 (QUANTITATIVE ANALYSIS FOR MANAGEMENT DECISION)

Problem Solving
1. Wilbert Lopez is the manager owner of a water refilling station whose customers are
growing in number. He is thinking whether to expand his shop on both sides, one side
only, or not to expand at all. If population of Pagadian would grow rapidly, a two side
expansion can bring him an additional return of 840,000 pesos while a one side
expansion will give an additional return of 690,000 pesos only. If population growth is
slow, the two side expansion can give additional return of 520,000 pesos while a one side
expansion will increase the profit by 480,000 pesos only. However, if population growth
is stagnant, a two side expansion can result in a loss of 300,000 pesos while a one side
expansion can result in a loss of 150,000. Marketing department estimates that the
probability of rapid growth is only 40 percent, 30 percent for slow growth and 30 percent
on stagnant on the basis of expected profit. What should Wilbert do?

Expand both sides

40% (840,000) P336,000


30% (520,000) 156,000
30% (-300,000) (90,000)
Profit P402,000

One Side

40% (690,000) P276,000


30% (480,000) 144,000
30% (-150,000) (45,000)
Profit P375,000

Please see below the flow chart.


Expand Both Sides Expand One Side

Profitable

Yes No Yes No

P402, 000.00 Do nothing P375, 000.00 Do Nothing

2. A shoe company invested 200,000 pesos in a development of a new design. Each bag costs
180 pesos and sells for 230 pesos. The company is trying to decide how many times/units of bag
to produce. Its facilities will allow to produce 35,000, 55,000 and 75,000 units of bags. If the bag
turns out to be a success, the company will be able to sell as many units as they can produce. If
not, they will be able to sell only 45,000 units. Marketing department estimates that the
probability of success is only 40 percent on the basis of expected profit. What should the
company do?
Requirement:
2.1 Construct the decision tree.

Cost

Investment: P 200,000

35,000 * 180 = 6,300.000


55,000 * 180 = 9,900,000
75,000 * 180 = 13,500

Sales in Maximum Production


75,000 * 230 = 17,250

If success
40% Sales P6, 900,000
Cost (5, 400,000)
1, 500,000
Investment (200,000)
Net Profit P1, 300,000.00
If NOT successful
45,000
*230
Sales 10,350,000
Cost (45,000 * 180) (8,100,000)
2,250,000
Investment (200,000)
Net Profit P2,150,000.00

Here is the example of decision tree base on the situation given.


These would be the outcome.

Sell of the Bags

40% Success Not Successful

Profit
Profit
P1, 3000,000.00
P2050, 000.00

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