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# 2 b due to the uncertainty in expected sales for

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Unformatted text preview: ld be (100,000 units)(\$30,000 – \$24,000) = \$600 million – \$200 million (fixed cost) = \$400 million. If the Indiana plant is used and sales are moderate, the profit would be (50,000 units)(\$30,000 – \$16,000) = \$700 million – \$200 million (fixed cost) = \$500 million. If the Georgia plant is used and sales are strong, the profit would be (100,000 units)(\$30,000 – \$20,000) = \$1000 million – \$400 million (fixed cost) = \$600 million. If the Georgia plant is used and sales are moderate, the profit would be (50,000 units)(\$30,000 – \$22,000) = \$400 million – \$400 million (fixed cost) = \$0. The resulting solved decision tree is shown below. The decision to share the plant in Indiana has a higher expected profit of \$440 million. 2 b. Due to the uncertainty in expected sales for the V...
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