Question: A company is considering whether it should propose two contracts ( Contract - A and Contract - B ) on offer from a government department
A company is considering whether it should propose two contracts ContractA and ContractB on offer from a government department for the supply of certain components. The company has three options:
propose for ContractA only; or
propose for ContractB only; or
propose for both ContractA and ContractB
For ContractA the cost of proposing is $ The component supply cost is $ The cost of proposing ContractB is $ The component supply cost is $ The cost of proposing for both ContractA and ContractB is $ The component supply cost is $ For each option, possible prices that the company will take are determined differently depending on the bidding condition. The following table shows how possible prices vary for each bidding condition and option.
tableOptionsBidding condition,Probability,Price $ContractA only,Competitive,Noncompetitive,CompetitiveNeutral,Noncompetitive,tableBoth ContractAand ContractBCompetitive,Noncompetitive,
To maximize the profit Price estimated cost which option should the company take? Answer using a decision tree.
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