Question 2

Milky Lane (ML) has come up with a new recipe for ice creams which they are planning to advertise and sell in the month of April 2022. As a frozen food, the sale of the ice cream depends on the weather. If the weather is cold, ML will sell 5 000 ice creams without the need to advertise. The weather forecast has indicated that there is a 70% probability of a cold weather in April 2022. If the weather in April 2022 turns out to be hot, ML will be able to sell 10 000 ice creams without the need to advertise. The weather forecast indicates a 30% probability of a hot weather in April 2022.

If ML continues to advertise the ice cream and the weather turns out to be cold, it is anticipated that there is a 60% probability that the advertising will increase the demand for ice creams to 7 000. If ML continues to advertise the ice cream and the weather turns out to be hot, it is anticipated that there is a 25% probability that the advertising will increase the demand for ice creams to 13 000.

The following is the profit expected from the ice cream at the different demand levels:

Number of ice creams sold	Profit (Excluding advertising)
	N$
5 000	(20 000)
6 000	(5 000)
7 000	35 000
8 000	55 000
9 000	70 000
10 000	90 000
11 000	115 000
12 000	130 000
13 000	150 000

The budget advertising cost of the ice cream is N$15 000

Required:

2.1 With the aid of a decision tree should ML advertise the ice cream? 20 marks