An events management company is trying to decide whether or not to advertise an outdoor concert. The sale of tickets is dependent on the weather. If the weather is poor it is expected that 5000 tickets will be sold without advertising. There is a 70 per cent chance that the weather will be poor. If the weather is good it is expected that 10000 tickets will be sold without advertising. There is a 30 per cent chance that the weather will be good.

If the concert is advertised and the weather is poor, there is a 60 per cent chance that the advertising will stimulate further demand and ticket sales will increase to 7000. If the weather is good there is a 25 per cent chance the advertising will stimulate demand and ticket sales will increase to 13000.

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

Required:
Demonstrate, using a decision tree, whether the concert should be advertised. (5 marks)
CIMA P1 Performance operations

Transcribed Image Text:

Number of tickets sold Profit $ 5000 6000 (20000) (5000) 7000 35000 8000 55000 9000 70000 10000 90000 11000 115000 12000 130000 13000 150000 The cost of advertising the concert will be $15000.