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an outdoor pursuits centre is planning for the year ahead there is a possibility tha 644163

An outdoor pursuits centre is planning for the year ahead. There is a possibility that the government will give additional funds to the education budget under an ‘active and healthy’ policy. There is also a possibility that this money will be diverted for other use and as a result the local councils will cut back on funds for outside activities. Normal conditions will mean that neither of these extremes occurs.

 

Condition

Predicted demand (pupil days)

Probability

Worst possible

Councils cuts back funds for activities

5,000

.4

Most likely

Normal

6,000

.3

Best possible

Schools ‘active and healthy’ programme

8,000

.3

The outdoor pursuits centre is facing three possible levels of surplus (fees minus costs) per pupil day. If new safety regulations are implemented from the start of the year, more staff will be required, thus reducing the estimated surplus per day. If the long term weather forecast is poor, bookings will be lower.

 

Condition

Predicted

Probability

 

 

surplus per

 

 

 

pupil day

 

Worst possible

New safety regulations and

£1.00

.2

 

poor weather forecast

 

 

Most likely

New safety regulations and

£1.50

.2

 

reasonable weather

 

 

Best possible

Safety regulations delayed and

£2.50

.6

 

reasonable weather

 

 

Required

(1) Evaluate the cost of all options, based on combining probabilities.

(2) Draw a decision tree for the choice: ‘keeping open the outdoor centre versus closing down’.

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