Reference no: EM133294493

To make WHIZ or not to make WHIZ.

As a new HUSB graduate, you have been assigned by Mr. Sudsy Martin, your boss at Phosphates Inc. to decide whether or not to introduce a new product called WHIZ! that gets all-white garments absolutely spotless. The only problem is Whiz is expensive and may also damage some clothing, leading to a sales decline. Also, it will cost more to advertise it since it's a new product and needs to gain recognition.

Here are the facts:

If you Introduce WHIZ! : there is . 8 chance sales go up $800,000 , a .2 chance they go down $100,000

Also if you introduce Whiz, there is a .4 chance a competitor will enter and decrease your sales $200,000 and a .6 chance they will decrease by $300,000.

Note: introducing WHIZ! requires $140,000 extra in advertising and other expenses.

If you do not Introduce WHIZ! : there is a 1 chance sales go up $1 million , a .9 chance they go down $300,000 due to product obsolescence.

Also if you do not introduce WHIZ!, there is a .8 chance a competitor will enter with their own new product and your sales will drop $200,000, and a .2 chance they will drop $300,000

If you do not introduce Whiz, you pay only $100,000 extra in expenses (advertising) to retain customers.

Enter your answers to the following in terms of thousands...so for example, 300,000 would be 300

Use a negative sign if the answer is negative i.e. -

If positive do NOT use a + sign

QUESTIONS

What is the effect on profit in dollars if you introduce Whiz ?

What is the impact on profits if you do NOT introduce Whiz ?

If negative put a MINUS in front of the answer!

What is the difference in profits between the two alternatives in thousands ?

Based on calculations, should you introduce WHIZ

A. Yes

B. No

C. The profit imapcts are the same for each alternative