If a Decision Tree Shows the Possible Profits Associated with Each

question 33

Multiple Choice

If a decision tree shows the possible profits associated with each of several alternative decisions, what is the optimal decision strategy?

• A)the strategy that has the maximum profit as one of its possible outcomes
• B)the strategy that results in the highest expected value of profit
• C)the strategy for which the sum of leaf-node values is a maximum
• D)the strategy that minimizes the variance in profit
• E)the strategy that minimizes the risk of obtaining the lowest possible profit

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Definitions:

Invested Assets

Assets that are purchased or acquired for the purpose of generating income or appreciation, including stocks, bonds, real estate, and more.

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue is contributing to covering fixed costs and generating profit.

Machine Hours

Machine hours measure the total operation time of machinery within a production process, often used as a basis for allocating overhead costs.

Markup Percentage

The percentage added to the cost price of goods to cover overhead and profit in the selling price.