Reference no: EM132633874

A company plans to sell 360000 units per annum of a new product but they uncertain of the selling price per unit and a variable cost per unit. The marketing department has provided the estimates of demand and their associated probabilities for each possible selling price as well as estimates of variable costs and their associated probabilities. The estimates are as follows:

Selling price and P and VC and their respective probabilities :

Selling price       R per unit probability

30                       30%

40                        45%

50                           25%

Variable cost and their respective probabilities :

Unit variable cost E per unit

12

16

20

Probability

20%

50%

30%

Fixed cost are estimated to be R84000 per annum

Required:

Question 1: Calculate the probability of earning a monthly contribution of grater than R510000.

Question 2: Describe the attitude of a decision makers who might choose the maximax; maximum and the expected value decision rules.