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CIMAPRO19-P01-1 Exam - Topic 5 Question 95 Discussion

A university is trying to decide whether or not to advertise a new post-graduate degree programme. The number of students starting the programme is dependent on economic conditions. If conditions are poor, it is expected that the programme will attract 40 students without advertising. There is a 60% chance that economic conditions will be poor. If economic conditions are good it is expected that the programme will attract only 20 students without advertising. There is a 40% chance that economic conditions will be good.If the programme is advertised and economic conditions are poor, there is a 65% chance that the advertising will stimulate further demand and student numbers will increase to 50. If economic conditions are good, there is a 25% chance the advertising will stimulate further demand and numbers will increase to 25 students.The profit expected, before deducting the cost of advertising, at different levels of student numbers are as follows:The cost of advertising the programme will be $15,000.Required:Demonstrate, using a decision tree, whether the programme should be advertised.
A) Yes, the programme should be advertised as the profit will be $82000
B) Yes, the programme should be advertised as the profit will be $92000
C) No, the programme should not be advertised as there will be a loss $82000
D) No, the programme should not be advertised as there will be a loss $92000

CIMAPRO19-P01-1 Exam - Topic 5 Question 95 Discussion

Actual exam question for CIMA's CIMAPRO19-P01-1 exam
Question #: 95
Topic #: 5
[All CIMAPRO19-P01-1 Questions]

A university is trying to decide whether or not to advertise a new post-graduate degree programme. The number of students starting the programme is dependent on economic conditions. If conditions are poor, it is expected that the programme will attract 40 students without advertising. There is a 60% chance that economic conditions will be poor. If economic conditions are good it is expected that the programme will attract only 20 students without advertising. There is a 40% chance that economic conditions will be good.

If the programme is advertised and economic conditions are poor, there is a 65% chance that the advertising will stimulate further demand and student numbers will increase to 50. If economic conditions are good, there is a 25% chance the advertising will stimulate further demand and numbers will increase to 25 students.

The profit expected, before deducting the cost of advertising, at different levels of student numbers are as follows:

The cost of advertising the programme will be $15,000.

Required:

Demonstrate, using a decision tree, whether the programme should be advertised.

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Suggested Answer: A

References:


by Brandon at Aug 24, 2024, 11:20 PM

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Weldon
9 months ago
Not sure about those profit estimates, they seem too optimistic.
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Ligia
10 months ago
I agree, advertising seems worth it for the potential profit.
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Eden
10 months ago
Wait, how can they expect a profit with those student numbers?
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Claudio
10 months ago
I think it’s risky to rely on advertising with those odds.
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Sherly
10 months ago
Sounds like advertising could really boost those numbers!
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Shawn
10 months ago
I feel like the profit numbers are really close, but I can't remember how to set up the decision tree properly to compare them.
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Salome
11 months ago
If I recall correctly, we need to calculate the expected profit for both scenarios, with and without advertising, to make the right decision.
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Dacia
11 months ago
I remember that advertising can change the expected number of students, but I’m confused about how to factor in the probabilities for each economic condition.
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Irving
11 months ago
I think we did a similar question in class about decision trees, but I'm not sure how to calculate the expected profits here.
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Altha
11 months ago
This is a tricky one. There are a lot of moving parts to consider, and I'm not sure I fully understand the implications of the different scenarios. I'll need to re-read the question carefully and maybe even sketch out a decision tree to visualize the options.
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Blythe
11 months ago
Okay, I think I've got a handle on this. The key is to calculate the expected value of advertising versus not advertising, taking into account the probabilities and payoffs. I'm feeling confident I can work through this step-by-step.
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Mariann
11 months ago
This looks like a classic decision tree problem. I'll need to carefully map out the probabilities and payoffs to determine the best course of action.
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Loreta
11 months ago
Hmm, I'm a bit confused by all the different scenarios and probabilities. I'll have to take some time to really understand the information provided before I can decide on the best approach.
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Lettie
11 months ago
I feel pretty confident about this one. The question is asking for events that can create an inspection lot, so I'll select goods movement, order creation, and ATP check as my answers.
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Anastacia
11 months ago
This seems like a pretty straightforward question about how bandwidth is allocated in a flow-based WFQ solution. I think I have a good understanding of the concepts, so I'll carefully read through the options and select the best answer.
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Amie
2 years ago
I bet the university's marketing team is already working on some catchy slogans. 'Degree of Profit: Advertise Today!'
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Jodi
2 years ago
Let's hope the university's marketing team comes up with a winning campaign!
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Herschel
2 years ago
Yeah, the decision tree will show us if it's the right move financially.
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Jennifer
2 years ago
I think it's worth the investment, especially if it can increase profits.
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Benton
2 years ago
I wonder if the advertising will really make a difference in student numbers.
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Freeman
2 years ago
I'm just curious to know what the post-graduate degree is. Interpretive Dance, perhaps?
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Holley
2 years ago
Hmm, this is a tough one. The decision tree sounds like the way to go to really crunch the numbers and make an informed choice.
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Darell
2 years ago
That sounds like a good plan. Let's go ahead and advertise the programme then.
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Kiley
2 years ago
I think we should go for option B) Yes, the programme should be advertised as the profit will be $92000.
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Iola
2 years ago
I agree, using a decision tree will help us see the potential outcomes more clearly.
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Leonie
2 years ago
In that case, we might end up with a loss. Maybe we should reconsider our decision.
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Leota
2 years ago
Hold up, I'm not so sure. Option A mentions a profit of $82,000, which is still a decent amount. I might need to look at the numbers a bit closer.
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Johna
2 years ago
Let's take a closer look at the decision tree to make sure we make the right decision.
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Mila
2 years ago
That's true, we need to carefully analyze the numbers to make the best choice.
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Magdalene
2 years ago
I agree, but we should consider all the options before making a decision.
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Josefa
2 years ago
Option A seems like a good choice, $82,000 profit is not bad.
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Marguerita
2 years ago
But what if economic conditions turn out to be good and advertising doesn't bring in more students?
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Sharan
2 years ago
I think we should advertise it, the profit seems promising.
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Lizette
2 years ago
Should we advertise the new post-graduate degree programme?
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Rory
2 years ago
I'm leaning towards option B. The potential profit of $92,000 if the programme is advertised seems like a strong incentive.
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Benedict
2 years ago
In that case, maybe we should also take into account the probability of economic conditions being poor before making a final decision.
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Reiko
2 years ago
That's true. If conditions are poor, the profit might not be as high as expected. It's a risk to consider.
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Alishia
2 years ago
But what if the economic conditions turn out to be poor? Wouldn't that affect the decision to advertise?
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Lashandra
2 years ago
I agree, option B does seem like the best choice. The potential profit is quite high.
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