(2) [50 marks] KLG is a company selling cheap cd players. Their selling price is £20 per cd player. They can either manufacture the cd players at their own plant in the UK or import them.
If the company decides to import the cd players, there is a 18% chance that a tariff of £2 per cd player will be imposed. The company will only find out whether there is a tariff after they have
made the decision to import or manufacture the cd players.
It may be assumed that the demand for cd players in a day will either be 200 or 300. If it is 200, it costs KLG £14 per cd player to manufacture and £13 per cd player to import. If the demand is
300, it costs KLG £10 per cd player to manufacture and £9 per cd player to import.
KLG has also the option to advertise the product each day. If they do advertise on a particular day, it costs them £800, and there is an 72% chance that the demand will be 300 cd players (and a 28%
chance that it will be 200). If they choose not to advertise, there is a 19% chance that the demand will be 300 cd players and an 81% chance it will be 200.
Use Excel to construct a Decision Tree for this problem. Use it to determine KLG’s optimal decisions about manufacturing, importing and advertising of the cd players.
The report should be written in Microsoft Word (or any other typesetting software) and should be NO MORE THAN 4 sheets of A4 paper including any figures, tables and text. The output of your Excel
spreadsheets and calculations should be included in your submitted report as print screen figures.