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  • Success Failure Cost of Test Sale Cost of Actual Sales Forecasted Test Sale Revenue Forecasted Actual Sale Revenue

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    Barson Mithun
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    The document analyzes the costs and potential revenues of test sales versus actual sales to determine the expected profit margin. It calculates the probability-weighted revenues and costs based on the forecasted revenue amounts and probability of success or failure for test sales and actual sales. The expected profit margin is calculated as $506,000 based on test sales having a 40% chance of success and actual sales following a test sale having a 75% chance of success.

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    Probability Tree Model

    Original Title

    probablity tree

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    The document analyzes the costs and potential revenues of test sales versus actual sales to determine the expected profit margin. It calculates the probability-weighted revenues and costs based on the forecasted revenue amounts and probability of success or failure for test sales and actual sales. The expected profit margin is calculated as $506,000 based on test sales having a 40% chance of success and actual sales following a test sale having a 75% chance of success.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    10 views2 pages

    Success Failure Cost of Test Sale Cost of Actual Sales Forecasted Test Sale Revenue Forecasted Actual Sale Revenue

    Uploaded by

    Barson Mithun
    The document analyzes the costs and potential revenues of test sales versus actual sales to determine the expected profit margin. It calculates the probability-weighted revenues and costs based on the forecasted revenue amounts and probability of success or failure for test sales and actual sales. The expected profit margin is calculated as $506,000 based on test sales having a 40% chance of success and actual sales following a test sale having a 75% chance of success.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 2

    Success Failure

    Cost of test sale 500000 500000


    Cost of actual sales 3000000 3000000
    Forecasted test sale revenue 400000 0
    Forecasted actual sale revenue 45000000 0

    Decisions Probability of outcome


    Success
    Test Sale
    40%
    Success Failure
    Actual Sales
    75.0% 25.0%
    Conditional Probablity 30.0% 10.0%

    Forecasted teste sales revenue 400000


    Forecasted avtual sales revenue 45000000 0
    Total revenue 45400000 400000
    Probablity weighted revenue 13620000 40000

    Cost of test sale 500000 500000


    Cost of actual sales 3000000 3000000
    Total Cost 3500000 3500000

    Probablity weight margin 10120000 -3460000

    Expected margin
    robability of outcome
    Failure
    60.0%
    Success Failure
    20.0% 80.0%
    12.00% 48.00%

    0
    45000000 0
    45000000 0
    5400000 0

    500000 500000
    3000000 3000000
    3500000 3500000

    1900000 -3500000

    5060000

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