Decision Tree

The budget analysis shows that the labor hours of the firm are higher than the budgeted amount. As such, the firm needs to evaluate the cost benefit analysis of making or buying their products. To make this decision, various factors need to be considered. Before making the decision, Peyton needs to evaluate the marginal costs and revenue of making versus buying the products. The firm should take the option which provides the highest marginal profit which is the

The best way to learn about the decision screens is to log on and pull up each decision screen. Review the following notes while looking at the screen:

A decision tree is a diagram consisting of circles decision nodes, square probability nodes and branches.

Provide a description of a scenario in which this kind of decision between two choices, based on weighing their underlying attributes, applies in the “real-world” business setting. Furthermore, what are the benefits and drawbacks, if any, to this method of decision making?

There are several occasions where I need to evaluate the marginal benefits and the marginal costs before I make a decision. For example, deciding what school to send my granddaughter to for high school. I

This is a two stage process. Tiffany first lists each option and gives a value to each in the criteria categories after doing research on each one Tiffany’s chart can be seen below:

The allocation of the New Product Development costs is also questionable. Even though these costs are being utilized to create new products, the established products are bearing the costs based on their profits.

To calculate the total costs involved for each of the three options, I have considered only those factors that are not common in all. I have calculated only the excess of cost that might be required to deploy an option.

Again, it is important to understand the trade-offs made in making compensation decisions and to see how those decisions fit with the rest of the strategy.

When considering the proposed advertising program and technology upgrades, we have to ensure that the project will likely add value to the company, so we need to consider the return on investment versus the cost of capital. If the return on investment, measured by the net present value and internal rate of return, exceeds the cost of capital, the investment should be taken.

The importance of decision making in individual daily life and in organization level was demonstrated by two scientists, Arkes and Hammond (1992), in ‘Judgment and Decision making’ indentified the four types of information which decision maker requires constructing a decision tree.

Many times when faced with a hard decision to make or one that involves many different factors or consequences the executive tends to look for “an educated guess” or “take a calculated risk” but no real calculation is done nor any education is obtained to deal with uncertainty concerning the decision.

When people argue with decision analysis and its achievements they usually mention the story of DuPont, an American chemical company. It managed to successfully integrate risk and decision analysis functions to both operational and strategic levels. The company claimed that Desciison and Risk Analysis not only brought tangible benefits to the company, but also intangible, such as increased attention and commitment to actions (Krumm et Roll, 1992).

Effectiveness of R&D Strategy. R&D can be a little tricky to setup. In my simulation, I am trying to keep my product development and upgrades within the same year allowing me to maximize considerably on sales. The most important figure in the Mean Time Before Fails (MTBF). This number gives us an estimated time the product may last before breaking or expiring. This number is determined by what the current demand is. This number needs to be fair to the product or the product may not sell. The higher this number is the higher the cost of the product. The remaining steps are a balancing act with the R&D cost, Material cost, and Age of revision. The product must be able to be made for less than it is sold for to maintain profitability. Awareness and Accessibility were critical in my efforts since they have such a big impact on product appeal and sales. As a broad differentiator, our minimum objective was 80% awareness and 80% accessibility by the end of the 4 practice rounds. Andrews spent a total of $38 million on awareness and $35 million on accessibility. At the end of 4 rounds, I had,

It is also a decision tree based approach but have more accuracy as compared to J48.