An outdoor pursuits centre is planning for the year ahead. There is a possibility that the government will give additional funds to the education budget under an ‘active and healthy’ policy.

There is also a possibility that this money will be diverted for other use and as a result the local councils will cut back on funds for outside activities. Normal conditions will mean that neither of these extremes occurs.

The outdoor pursuits centre is facing three possible levels of surplus (fees minus costs) per pupil day. If new safety regulations are implemented from the start of the year more staff will be required, reducing the estimated surplus per day. If the long-term weather forecast is poor, bookings will be lower.

Required (1) Evaluate the cost of all options, based on combining probabilities.
(2) Draw a decision tree for the choice: ‘keeping open the outdoor centre versus closing down’.

Transcribed Image Text:

Worst possible Most likely Best possible Condition Councils cuts back funds for activities Normal Schools 'active and healthy' programme Predicted Probability demand (pupil days) 5,000 6,000 8,000 .4 .3 .3