MNGT 21 – Management Science Decision Tree 1. A manager has to decide whether to prepare a bid or not. It costs P5,000 to prepare the bid. If the bid is submitted, the probability that the contract will be awarded is 50%. If the company is awarded the contract, it may earn an income of P100,000 if it succeeds, or pay a fine of P8,000 if it fails. The probability of success is estimated to be 80%. Should the manager prepare a bid? Mr. del Mundo, the president of RFC Corporation is faced with deciding whether to purchase a patent to develop a new product or not. If the company purchases the patent, it should develop the product. The selling price of the patent if P50,000. There are two ways of developing the product: the Modern Method and the Traditional Method. It costs P20,000 to use the Modern Method, and P15,000 for the traditional Method. The proby of success in the Modern Method is 60%, while it is 70% for the Traditional Method. If the product is successfully developed, it will an income of P500,000. Should the company purchase the patent? If so, what method of development should be used?

MNGT 21 – Management Science Decision Tree 1. A manager has to decide whether to prepare a bid or not. It costs P5,000 to prepare the bid. If the bid is submitted, the probability that the contract will be awarded is 50%. If the company is awarded the contract, it may earn an income of P100,000 if it succeeds, or pay a fine of P8,000 if it fails. The probability of success is estimated to be 80%. Should the manager prepare a bid? Mr. del Mundo, the president of RFC Corporation is faced with deciding whether to purchase a patent to develop a new product or not. If the company purchases the patent, it should develop the product. The selling price of the patent if P50,000. There are two ways of developing the product: the Modern Method and the Traditional Method. It costs P20,000 to use the Modern Method, and P15,000 for the traditional Method. The proby of success in the Modern Method is 60%, while it is 70% for the Traditional Method. If the product is successfully developed, it will an income of P500,000. Should the company purchase the patent? If so, what method of development should be used?

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 21P

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