Question

Bolic Electronics Sdn. Bhd., Perak, has the option of (a) proceeding immediately with the production of a new top-of-the-line stereo TV that has just completed prototype testing or (b) having the value analysis team complete a study. If Kumar Khan, VP for operations, proceeds with the existing prototype (option a), the firm can expect sales to be 95,000 units at RM450 each, with a probability of 0.6, and a 0.4 probability of 66,000 at RM450. If, however, he uses the value analysis team (option b), the firm expects sales of 66,200 units at RM650, with a probability of 0.7, and a 0.3 probability of 64,500 units at RM650. Value analysis, at a cost of RM80,000 is only used in option b. (i) Draw the decision Tree  (ii) Which option should the company choose and why?