Decision Making Under Uncertalnty

Exquisite Foods Incorporated $($EFI$)$ sells premium foods. Three independent strategies are being considered to promote a new product, Sauftis for Microwaves, to dudi$-$career families. Currently the contribution margin ratio on EFrs foods is $65\%,$ which is expected to apply to the new product. EFrs policy for promoting new products permits onfy one type of advertising campaign until the product has been astablished

Strategy One

The first strategy concentrates on television and magazine advertising. EFI would hire a marketing consutamt to prepare a $30-$second video commercial and a magazine adverisament. The commercial would air during the evening to address the working market while the magazine advertisement would be place in magazines read by career$-$minded individuals. This advertising campaign would provide EFI $$230,000$ expected contribution from sales.

Strategy Two

The second strategy promotes the product by offering $25\%$ off coupons in the Sunday newspaper supplements, with a projected $15$ percent redemption rate on sales revenue. EFI would hire a marketing consultant for $$5,000$ to design a one$-$quarter page, two$-$color coupon adventisement. The coupon would be distributed in the Sunday newspaper supplements at a cost of $$195,000.$ Blased on prior experience, EF: expects the following addilional sales from this form of advertisement.

Expected sales

Probability

s $500,000108$

$600\mathrm{.}00025$

$700,000$

$35$

$800,000$

$20$

$900,000$

$10$

Strategy Three redemption rale is expected. Efl expects the following additional sales from this type of promotion:

Expected aslen

$$600,000$

$$50,000$

$500,000$

s$50,000$

$600,000$

Probabulity

$10+$

$30$

$39$

$20$

$20$

$

Required:

Exquisle foods incueporated $($EFI$)$ wishes to seledt the