CIMA Exam CIMAPRO19-P01-1 Topic 5 Question 95 Discussion

Actual exam question for CIMA's CIMAPRO19-P01-1 exam

Question #: 95
Topic #: 5

A university is trying to decide whether or not to advertise a new post-graduate degree programme. The number of students starting the programme is dependent on economic conditions. If conditions are poor, it is expected that the programme will attract 40 students without advertising. There is a 60% chance that economic conditions will be poor. If economic conditions are good it is expected that the programme will attract only 20 students without advertising. There is a 40% chance that economic conditions will be good.

If the programme is advertised and economic conditions are poor, there is a 65% chance that the advertising will stimulate further demand and student numbers will increase to 50. If economic conditions are good, there is a 25% chance the advertising will stimulate further demand and numbers will increase to 25 students.

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

The cost of advertising the programme will be $15,000.

Required:

Demonstrate, using a decision tree, whether the programme should be advertised.

AYes, the programme should be advertised as the profit will be $82000

BYes, the programme should be advertised as the profit will be $92000

CNo, the programme should not be advertised as there will be a loss $82000

DNo, the programme should not be advertised as there will be a loss $92000

Show Suggested Answer

Suggested Answer: A

References:

by Brandon at Aug 24, 2024, 11:20 PM

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Amie

3 months ago

I bet the university's marketing team is already working on some catchy slogans. 'Degree of Profit: Advertise Today!'

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Jodi

2 months ago

Let's hope the university's marketing team comes up with a winning campaign!

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Herschel

2 months ago

Yeah, the decision tree will show us if it's the right move financially.

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Jennifer

2 months ago

I think it's worth the investment, especially if it can increase profits.

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Benton

2 months ago

I wonder if the advertising will really make a difference in student numbers.

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Freeman

3 months ago

I'm just curious to know what the post-graduate degree is. Interpretive Dance, perhaps?

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Holley

3 months ago

Hmm, this is a tough one. The decision tree sounds like the way to go to really crunch the numbers and make an informed choice.

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Darell

2 months ago

That sounds like a good plan. Let's go ahead and advertise the programme then.

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Kiley

2 months ago

I think we should go for option B) Yes, the programme should be advertised as the profit will be $92000.

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Iola

2 months ago

I agree, using a decision tree will help us see the potential outcomes more clearly.

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Leonie

3 months ago

In that case, we might end up with a loss. Maybe we should reconsider our decision.

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Leota

3 months ago

Hold up, I'm not so sure. Option A mentions a profit of $82,000, which is still a decent amount. I might need to look at the numbers a bit closer.

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Johna

2 months ago

Let's take a closer look at the decision tree to make sure we make the right decision.

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Mila

2 months ago

That's true, we need to carefully analyze the numbers to make the best choice.

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Magdalene

2 months ago

I agree, but we should consider all the options before making a decision.

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Josefa

3 months ago

Option A seems like a good choice, $82,000 profit is not bad.

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Marguerita

3 months ago

But what if economic conditions turn out to be good and advertising doesn't bring in more students?

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Sharan

3 months ago

I think we should advertise it, the profit seems promising.

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Lizette

4 months ago

Should we advertise the new post-graduate degree programme?

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Rory

4 months ago

I'm leaning towards option B. The potential profit of $92,000 if the programme is advertised seems like a strong incentive.

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Benedict

3 months ago

In that case, maybe we should also take into account the probability of economic conditions being poor before making a final decision.

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Reiko

3 months ago

That's true. If conditions are poor, the profit might not be as high as expected. It's a risk to consider.

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Alishia

3 months ago

But what if the economic conditions turn out to be poor? Wouldn't that affect the decision to advertise?

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Lashandra

3 months ago

I agree, option B does seem like the best choice. The potential profit is quite high.

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