Construct a Decision Tree to Help Southport Identify the Strategy

question 58

Essay

Construct a decision tree to help Southport identify the strategy that maximizes its expected profit for this investment.Make sure to label all decision and chance nodes and include appropriate costs,payoffs and probabilities.

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Definitions:

Purchases Discount

A contra-cost account in the general ledger that records discounts offered by vendors of merchandise for prompt payment of purchases by buyers.

Merchandise

Goods brought into a store for resale to customers.

Purchase Discounts

Reductions in price given by a supplier to a buyer for early payment within a specified period.

Purchase Discounts Lost

The additional expense a company incurs when it fails to take advantage of discounts offered by suppliers for early payment.