WHU C207 Task 2: Decision Tree Analysis., Assignments of Advanced Data Analysis

Download WHU C207 Task 2: Decision Tree Analysis. and more Assignments Advanced Data Analysis in PDF only on Docsity!

Task 2: Decision Tree Analysis Ken Shoup Western Governors University Janice Johnson November 24, 2025

A. Summarize the business scenario by doing the following:

1. Describe a business question that could be answered by applying decision tree analysis and is derived from the scenario in “Decision Tree Analysis Resources." For MPC, will developing a new drug line, explotiing the existing drug line, or continuing with the current drug line yield the highest expected value?
2. Justify why decision tree analysis is the appropriate analysis technique, and include relevant details from the scenario to support your justification. MPC needs to make a business decision based on multiple different options – in this case, three: develop a new drug line, exploit the existing drug line, or continue the current drug line. Each option has either a favorable or unfavorable outcome, with probabilities tied to each. Between profit per unit and the number of units moved for each outcome, we can calculate the expected values of each scenario and outcome. Based on all of this information, a decision tree presents the best option for organizing the information and making a business decision. B. Identify the relevant data values required for your decision tree analysis, including the following:
   • demands
   • profits per unit
   • probabilities See attached Excel workbook under “Data Analysis Template.”

1. Exploit Existing Drug Line: EV=(5577$0.76)0.62+(1911$0.76)0.38=$4,238.520.62+ $1,452.360.38=$3,179.
2. Continue Current Drug Line: EV=(657$0.86)0.78+(258$0.86)0.22=$565.020.78+$221.880.22=$489.
3. List one limitation for each of the following:

• any one of the data values listed in part B
• the decision tree analysis For the data values, profit per unit is limiting in that it assumes that profit per unit remains constant for a given period; this is likely not true in the short term, and even less so in the long term as MPC faces production setbacks, raw material price fluctuations, increasing worker salaries, and more. For the decision tree analysis itself, non-financial factors are not considered, including MPC’s risk associated with each decision; starting up a new drug line or exploiting the existing one may not go as smoothly as planned, and there may be unforeseen hiccups with just continuing the current drug line. E. Recommend a course of action that addresses the business question from part A and is based on the results of your decision tree analysis. MPC should exploit the existing drug line as it yields the highest expected value (EV).