Decision Trees

question 3

Essay

Decision Trees. Arnie Becker, an attorney with Dewey, Cheetum & Howe in Los Angeles, California, must serve a subpoena to an individual in New York, New York by 10:00 a.m. tomorrow morning. If the subpoena is delivered late, Becker stands to lose $5,000 in fees. The subpoena can be delivered by mail at a cost of $25, or by courier at a cost of $225. Based on passed experience, Becker assigns a 99% change of on-time delivery using the courier service. Because Express Mail is a relatively new service, Becker does not know the probability of on-time delivery using this service.
A. Construct a decision tree for this problem and calculate the minimum probability of on-time delivery for Express Mail that would make Becker indifferent to the two delivery services.

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Definitions:

Physical Inventory

A detailed listing of merchandise on hand.

Perpetual Inventory System

An accounting method that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.

Merchandise Inventory Account

An account that records the value of goods that a retailer, wholesaler, or distributor has available for sale to customers at any given time.

Specific Identification

An inventory costing method where individual costs are assigned to specific items of inventory, often used for unique or high-value items.