The Super Cola Company must decide whether or not to itroduce a new diet soft dr

Question

The Super Cola Company must decide whether or not to itroduce a new diet soft drink. Management feels that if it does introduce the diet soda it will yield a profit of $1 million if sales are around 100 million, a profit of $200,000 if sales are around 50 million, or it will lose $2 million if sales are only around 1 million bottles. If Super Cola does not market the new diet soda, it will suffer a loss of $400,000.

A. Should Super Cola introduce the soda if the company: (1) is conservative: (2) is optimistic: (3) wants to minimize its maximum dissapointment?

B. An internal marketing research study has found P(100 million in sales) = 1/3; P(50 million in slaes)= 1/2; P(1 million in sales)= 1/6. Should Super Cola introduce the new diet soda?

C. A consulting firm can perform a more thorough study for $275,000. Should management have this study performed?

Explanation / Answer

A. Should Super Cola introduce the soda if the company: (1) is conservative: (2) is optimistic: (3) wants to minimize its maximum dissapointment?

conservative ---> it should intruce

optimistic *----> introduce

wants to minize ----> not introduce

B. An internal marketing research study has found P(100 million in sales) = 1/3; P(50 million in slaes)= 1/2; P(1 million in sales)= 1/6. Should Super Cola introduce the new diet soda?

Exp = 1/3 * 100 + 1/2 * 2000 + 1/6 * 1000

Exp = 1200

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C. A consulting firm can perform a more thorough study for $275,000. Should management have this study performed?

no it should have done this studfy, it is more expensive

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