Step-by-Step Guide: WGU C207 Task 2 – Decision Tree Analysis

WGU C207 Task 2 – Decision Tree Analysis

Competences

3009.1.1 : The Case for Quantitative Analysis

The graduate uses decision-making methods to develop strategies for organizational decision processes.

3009.1.2 : Statistics as a Managerial Tool

The graduate uses a variety of decision-analysis tools to evaluate alternatives during the decision-making processes.

3009.1.3 : More Statistical Tools

The graduate uses quantitative techniques and statistical tools to identify the most appropriate decision alternatives.

Introduction

Managers are required to organize, interpret, and display data that is reliable and relevant to the real-world decisions they must make in their businesses. The use of analytical tools will improve your ability to use data to make informed decisions.

In this task, you will address the business situation in the attached scenario. You will access the scenario and dataset by entering your student ID number in the “Start” tab of the “Decision Tree Analysis Resources” document found in the Supporting Documents section. The scenario and dataset are located in the “Decision Tree Scenario” tab. Using this dataset, you will perform a decision tree analysis and recommend a solution.

This recommendation will be included in a report you will write summarizing the key details of your analysis.

For full functionality of the scenario and data attachment, you must use Microsoft Excel, which is available via the Microsoft Office 365 subscription service provided to all WGU students. It can be downloaded using the “Microsoft Office 365” link in the Web Links section.

Scenario

Refer to the scenario located in the supporting document, “Decision Tree Analysis Resources.”

Requirements

Your submission must represent your original work and understanding of the course material. Most performance assessment submissions are automatically scanned through the WGU similarity checker.

Students are strongly encouraged to wait for the similarity report to generate after uploading their work and then review it to ensure Academic Authenticity guidelines are met before submitting the file for evaluation. See Understanding Similarity Reports for more information.

Grammarly Note:

Professional Communication will be automatically assessed through Grammarly for Education in most performance assessments before a student submits work for evaluation. Students are strongly encouraged to review the Grammarly for Education feedback prior to submitting work for evaluation, as the overall submission will not pass without this aspect passing. See Use Grammarly for Education Effectively for more information.

Microsoft Files Note:

Write your paper in Microsoft Word (.doc or .docx) unless another Microsoft product, or pdf, is specified in the task directions. Tasks may notbe submitted as cloud links, such as links to Google Docs, Google Slides, OneDrive, etc. All supporting documentation, such as screenshots and proof of experience, should be collected in a pdf file and submitted separately from the main file. For more information, please see Computer System and Technology Requirements.

You must use the rubric to direct the creation of your submission because it provides detailed criteria that will be used to evaluate your work. Each requirement below may be evaluated by more than one rubric aspect. The rubric aspect titles may contain hyperlinks to relevant portions of the course.

Complete your decision tree analysis and create a report by doing the following:

Note: The supporting document “Decision Tree Analysis Resources” contains a scenario, data set, and template. While you must use the scenario and data set provided in the supporting document, the template is optional. You are encouraged to use the template to complete your analysis. Please see supporting document, “QUM3 Task 2 Getting Started,” for help accessing the scenario and dataset.

A. Summarize the business scenario by doing the following:

1. 1. Describe a business question that could be answered by applying decision tree analysis and is derived from the scenario in “Decision Tree Analysis Resources.”

   2. Justify why decision tree analysis is the appropriate analysis technique, and include relevant details from the scenario to support your justification.

B. Identify the relevant data values required for your decision tree analysis, including the following:

• demands

• profits per unit

• probabilities

C. Report how you analyzed the data using decision tree analysis by completing a decision tree diagram that includes each of the following:

• state-of-nature nodes

• calculated payoffs, each expressed out to two decimal places

• expected values, each expressed out to two decimal places

Note: Include “Decision Tree Analysis Resources.” spreadsheet with your task submission for evidence of your calculations and decision tree diagram.

Note: Refer to “Prepare for the Performance Assessment Task 2″ in the course of study to examples of acceptable output.

D. Summarize the implications of your decision tree analysis by doing the following:

1. 1. Explain each step required to determine the expected value based on

   2. List one limitation for each of the following:

      • any one of the data values listed in part B

      • the decision tree analysis

E. Recommend a course of action that addresses the business question from part A and is based on the results of your decision tree analysis.

F. Acknowledge sources, using in-text citations and references, for content that is quoted, paraphrased, or

G. Demonstrate professional communication in the content and presentation of your submission.

Step-by-Step Guide: WGU C207 Task 2 – Decision Tree Analysis

Before You Begin: Access Your Data

1. Download Decision Tree Analysis Resources.xlsx from the WGU course page
2. Open it in Microsoft Excel (not Google Sheets — it won’t work properly)
3. Go to the “Start” tab and enter your student ID number
4. Navigate to the “Decision Tree Scenario” tab to read your scenario and view your dataset
5. Also download “QUM3 Task 2 Getting Started.docx” — it contains walkthrough guidance specific to your scenario
6. Note all key data values: the decisions available, demand levels, profits per unit, and probabilities

Section A: Summarize the Business Scenario

A1 – Business Question

• Read your scenario carefully and identify what decision the manager is trying to make
• The question should involve choosing between two or more alternatives under uncertain conditions
• Format example: “Which production/inventory/capacity option — [Option A] or [Option B] — should [Company] choose to maximize expected profit given uncertain demand?”
• Make sure the question is specific to your scenario’s context and clearly implies multiple decision paths with uncertain outcomes

A2 – Justify Decision Tree Analysis

Explain why decision tree analysis is the right tool using all three of these angles:

• Multiple decision alternatives: The scenario presents two or more options the manager must choose between (e.g., large vs. small facility, high vs. low production run)
• Uncertainty in outcomes: Demand or other outcomes are uncertain, with known probabilities assigned to each possible state — exactly what decision trees are designed to handle
• Quantifiable payoffs: Each combination of decision and demand outcome produces a calculable monetary payoff, which the tree organizes and compares
• Tie each point back to specific details from your scenario

Section B: Identify the Relevant Data Values

Open your Excel dataset and extract and list all three required elements clearly in your paper:

Demands

• These are the possible demand levels in the scenario (e.g., High Demand, Medium Demand, Low Demand)
• List the specific numerical demand quantities given in your dataset

Profits Per Unit

• These are the profit values associated with each decision alternative under each demand level
• Pull these directly from the dataset — express them accurately
• These will be used to calculate your payoffs

Probabilities

• These are the likelihoods assigned to each demand level (e.g., P(High) = 0.30, P(Medium) = 0.50, P(Low) = 0.20)
• Confirm they add up to 1.0 — if they don’t, recheck your data entry
• These are used to weight each payoff when calculating expected values

Present all three data categories in a clean, organized table or clearly labeled paragraph in your paper.

Section C: Build the Decision Tree Diagram

This is the core deliverable. You will complete the diagram inside the Excel template provided, then include it in your Word report.

Step 1 – Understand the Tree Structure

A decision tree has two types of nodes:

• Decision node (square □): Represents a choice the manager makes (e.g., Option A vs. Option B)
• State-of-nature node (circle ○): Represents uncertain outcomes (e.g., High, Medium, Low demand) — the rubric specifically requires these to be labeled

Step 2 – Calculate Each Payoff

For every branch (each combination of decision + demand level), calculate the payoff:

Payoff = Profit per unit × Demand quantity

• Calculate each payoff and round to two decimal places (rubric requirement)
• Enter these at the end of each branch on the tree

Step 3 – Calculate Expected Values (EV)

For each decision alternative, multiply each payoff by its probability, then sum them:

EV = (Payoff₁ × P₁) + (Payoff₂ × P₂) + (Payoff₃ × P₃)

• Calculate the EV for each decision alternative
• Round each EV to two decimal places (rubric requirement)
• The decision with the highest EV is the recommended choice

Step 4 – Complete the Diagram

Your completed decision tree must include all of the following (rubric-required):

• State-of-nature nodes clearly labeled
• All calculated payoffs (to two decimal places) at each branch end
• Expected values (to two decimal places) at each state-of-nature node

Important: Submit the completed Excel spreadsheet alongside your Word document as evidence of your calculations.

Section D: Summarize the Implications

D1 – Explain Each Step to Determine Expected Value

Walk through the process step by step in plain language. Cover all of the following:

1. Identify payoffs — Explain that each payoff is calculated by multiplying profit per unit by the demand quantity for that branch
2. Apply probabilities — Explain that each payoff is then multiplied by the probability of that demand state occurring
3. Sum the weighted payoffs — Explain that the products from step 2 are added together to produce the expected value for that decision alternative
4. Compare EVs — Explain that the alternative with the highest expected value is selected as the optimal decision

Be specific — reference actual numbers from your analysis where possible.

D2 – Identify Two Limitations

The rubric requires one limitation for a data value and one limitation of the decision tree analysis method itself. Here are strong options for each:

Limitation of a data value (choose one):

• Probabilities are often estimated based on historical data or managerial judgment and may not accurately reflect future conditions — if the probabilities are wrong, the expected values will be misleading
• Profit per unit figures may not account for variable costs, seasonal changes, or market shifts, making them an oversimplification
• Demand figures may be based on forecasts that carry inherent uncertainty

Limitation of decision tree analysis (choose one):

• Decision trees assume static probabilities and payoffs — in reality, these values may shift over time as market conditions change
• The model does not account for risk tolerance — two alternatives with similar EVs may carry very different levels of financial risk
• Decision trees can become overly complex when there are many decision points, making them harder to interpret accurately

Section E: Recommend a Course of Action

• Identify which decision alternative had the highest expected value from your tree
• Recommend that alternative clearly and directly
• Tie the recommendation back to the business question from A1
• Reference the specific EV figures to support your recommendation
• Example format: “Based on the decision tree analysis, [Option X] yields the highest expected value of $[XX.XX] and is therefore recommended as the optimal course of action. This directly addresses the business question of which option maximizes expected profit under uncertain demand conditions.”

Section F: Sources & Citations

• Cite any course textbook, methodology reference, or external source used in APA 7 format
• In-text: (Author, Year)
• Full reference list at the end of the paper
• At minimum, cite any source you reference when explaining decision tree methodology or expected value calculations

Section G: Professional Communication

• Write in formal academic tone throughout
• Run your paper through Grammarly for Education before submitting — the rubric explicitly requires this step and the paper will not pass without it
• Check grammar, punctuation, sentence fluency, and contextual spelling
• Use clear paragraph breaks — one main idea per paragraph

What To Submit

You have two files to submit for this task:

Final Checklist Before Submitting

• Student ID entered and correct scenario/data loaded in Excel
• Business question is scenario-specific and decision-tree-appropriate
• Decision tree justification references specific scenario details
• All three data values listed: demands, profits per unit, and probabilities
• Probabilities sum to 1.0
• All payoffs calculated and expressed to two decimal places
• All expected values calculated and expressed to two decimal places
• State-of-nature nodes labeled on the diagram
• Each step of the EV calculation process explained in writing
• One data value limitation and one decision tree limitation included
• Recommendation tied directly to the highest EV result
• APA in-text citations and reference list included
• Grammarly review completed
• Word file saved as .docx
• Excel file saved and ready to submit alongside the Word file
• Similarity report reviewed before final submission