Reference no: EM132954629

Questions -

Q1. A toy company has invested P100,000 in the development of a new electronic robot toy. Each unit of the toy will cost P20 to make and will sell for P35. The company is trying to decide how many units of toy to produce for Christmas season. Its facilities will allow it to produce 40,000,60,000 or 80,000 units of the toy. If the toy turns out to be success, the company will be able to sell only 50,000 units. The marketing department estimates that the probability of the toy to be success is 40%. What should the company do?

Q2. The JCM Company is considering the purchase of mineral rights on a piece of property for P50,000. The price includes a seismic test whether the land is of Type X geological formation or Type Y geological formation. The test cannot be done until after the purchase is made. According to reliable information, 60% of the land is Type X formation and 40% of the land is of Type Y. If the company decides to drill on the land, it will cost P150,000. It may hit oil, gas, or dry well. Drilling experience indicates that the probability of hitting oil is 25% on X formation. The estimated return from an oil well is P900,000 and from a gas well is P500,000. Should the company purchase mineral rights.