Analyze the Following Decision Tree

question 80

Multiple Choice

Analyze the following decision tree.After determining the missing probabilities,identify which alternative (Option 1 or Option 2) has the higher expected payoff.What is the expected payoff?

• A)Option 1,with an expected payoff of less than $25
• B)Option 1,with an expected payoff of $25 or more
• C)Option 2,with an expected payoff of less than $25
• D)Option 2,with an expected payoff of $25 or more

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Definitions:

Contribution Margin

The amount of revenue remaining after deducting variable costs, used to cover fixed expenses and generate earnings.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.

Variable Costs

Expenses that change in proportion to the activity of a business, such as sales volume or production levels.

Fixed Expenses

Costs that do not fluctuate with the volume of production or sales, such as rent, salaries, and insurance premiums.