Exam code: 7132
Syllabus Edition
First teaching 2023
Last exams 2027
In a decision tree there are four possible outcomes of an action.
The probabilities of the 1st, 2nd and 3rd outcomes are 0.4, 0.32 and 0.24 respectively.
The probability of the 4th outcome is:
0.04
0.16
0.16
0.4
Was this exam question helpful?
In a decision tree, the expected value of a decision is calculated by:
Adding together the probabilities of all possible outcomes
Multiplying the probability of each outcome by its financial value and summing the results
Subtracting the initial investment cost from the highest possible financial outcome
Subtracting the initial investment cost from the sum of all possible financial outcomes
Was this exam question helpful?
In a decision tree the net gain of a decision is the:
average pay-off of the outcomes.
expected value of the best decision minus the expected value of the next best decision.
expected value minus the initial cost.
total pay-off of the outcomes minus the initial cost.
Was this exam question helpful?
Figure 3 shows a decision tree with three options:
Option 1 is a new promotional campaign.
Option 2 is a modified product.
Option 3 is to do nothing.
Referring to Figure 3, calculate the expected value and the net gain of Option 1.
Figure 3 shows a decision tree with three options:
Option 1 is a new promotional campaign.
Option 2 is a modified product.
Option 3 is to do nothing.
Using these calculations and the other data in Figure 3, state which one of the three options the business should choose.
Was this exam question helpful?
Brayford Cycles has been without a permanent managing director for eight months. Decisions on pricing and supplier contracts have repeatedly been deferred.
Explain one way this delay in decision-making is likely to affect Brayford Cycles.
Was this exam question helpful?
Kestrel Foods is considering building a second factory in Poland to supply its European customers. The decision would commit a large share of the business's resources and would be very difficult to reverse.
Explain why this would be a strategic decision for Kestrel Foods.
Was this exam question helpful?
Marlow Drinks is considering launching a canned cocktail range at a cost of £1.8m. Its market research suggests a 60% chance of achieving the sales target.
Explain the difference between the risk and the uncertainty that Marlow Drinks faces in making this decision.
Was this exam question helpful?
Denholm Engineering has £2m available to invest. It can either replace its ageing machinery or launch a new product line, but it cannot do both.
Analyse the importance of opportunity cost to Denholm Engineering's decision.
Was this exam question helpful?
Callow Retail holds loyalty card records covering 400,000 households. It is considering using this data to decide which products to include in a new price-match campaign.
Analyse the benefits and drawbacks to Callow Retail of taking a scientific approach to this decision.
Was this exam question helpful?
The Marketing Manager of a business is considering whether to choose Option A or Option B.
Option A: Introduce a new product.
Option B: Use a new promotion for an existing product.
Figure 4 shows the results of a decision tree for these options and the 'do nothing' option.
Based on this decision tree, the Marketing Manager chooses Option A.
Using Figure 4, analyse why choosing Option A might not be the best decision.
Was this exam question helpful?
Read the case study in the Insert.
Considering both quantitative and qualitative factors, should Jack give up his job to become a full-time entrepreneur? Justify your answer.
Was this exam question helpful?