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Capacity Expansion Decision Tree Analysis Group 6

1. The document presents a decision tree analysis for NBM Furniture considering expanding production capacity through a large or small process line. The analysis finds that selecting a large process line will result in higher profits. 2. A second decision tree is presented for a property contractor considering rezoning land and building either a shopping center or apartments. The analysis determines that rezoning the land and building a shopping center will provide the highest expected monetary value of $532,000. 3. In both decision trees, alternative options are evaluated based on potential revenues, costs, and probabilities to identify the highest profit or value option.

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Annisaa Utami
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52 views

Capacity Expansion Decision Tree Analysis Group 6

1. The document presents a decision tree analysis for NBM Furniture considering expanding production capacity through a large or small process line. The analysis finds that selecting a large process line will result in higher profits. 2. A second decision tree is presented for a property contractor considering rezoning land and building either a shopping center or apartments. The analysis determines that rezoning the land and building a shopping center will provide the highest expected monetary value of $532,000. 3. In both decision trees, alternative options are evaluated based on potential revenues, costs, and probabilities to identify the highest profit or value option.

Uploaded by

Annisaa Utami
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Capacity Expansion Decision Tree Analysis

Group 6 :
Annisaa Dwi Utami – 26121116

Triyanto Ariwibowo 29121004

Melissa Marta 29121072

Clive Hosea Suryaputra 29121132

Isrianto Kurniawan 29121185


1. NBM Furniture Large Sales
Revenue – Expand Cost = $200,000
0.67

Large Process Line


$100,000

Low Sales
Revenue – Expand Cost = -$ 100,000

0.33
NBM Furniture
$100,000 Low Sales
Revenue – Expand Cost = $0
0.33

Not Expand
Revenue – Expand Cost 1= $100,000
Small Process Line
$67,000

Large Sales
100,000
0.67

Based on decision tree analysis, we conclude that the Expand Line


higher profit is given when large process is selected.
So, company should choose a large process line
Revenue – Expand Cost 1 – Expand
expansion.
Cost 2 = $50,000
2. Property Contractor

Not Rezoned
Revenue – Cost of Land = $ 400,000
0.4

$160,000 Department
Store
Revenue – Cost of Land –
Property Contractor 0.7
Electricity & Roads = $ 1,000,000
$532,000
Build Shopping Center $1,300,000

Insurance
Revenue – Cost of Land –
0.3 Electricity & Roads = $2,000,000
Rezoned
$1,300,000
Real Estate
0.6 Revenue – Cost of Land –
$780,000 0.6 Electricity & Roads = $1,500,000

Build 1500 Apartment


$900,000
Based on decision tree analysis, we conclude that the
higher profit is given when the property contractor
Construction
choose to rezone the area and build Shopping center
Revenue – Cost of Land –
instead of building apartment. The expected 0.4 Electricity & Roads = $0
monetary value will be $532,000.

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