Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
MARGINAL ANALYSIS
It is difficult to develop the conditional profit table when there are a large number of scenarios and possible actions. The marginal analysis approach sidesteps an unmanageable conditional profit table. We will illustrate the procedure and its advantages through the following example.
Example
The fresh from the fields, vegetable and fruit wholesalers buys, produce and then sells to retailers. Currently, green peas are available. The wholesaler pays Rs.200 per box of peas. A box sold on the same day fetches Rs.300, otherwise it has a salvage value of Rs.50. Historical data has established the following demand for green peas.
Number of boxes
21
22
23
24
25
26
27
28
Probability
0.07
0.08
0.10
0.11
0.29
0.20
0.09
0.06
The wholesaler has decided to stock the optimal number of boxes based on the expected profit criterion.
Let us solve the problem using the conditional profit table. Note that the profit generated by the sale of one box is Rs.100 and the loss incurred on an unsold box is Rs.150.00.
Conditional Profit Table
Stocking level
Daily Demand
Expected profit
21(0.07)
22(0.08)
23(0.10)
24(0.11)
25(0.29)
26(0.20)
27(0.09)
28(0.06)
2100
1950
1800
1650
1500
1350
1200
1050
2200
2050
1900
1750
1600
1450
1300
2300
2150
2000
1850
1700
1550
2400
2250
2500
2350
2600
2450
2700
2550
2800
2100.00
2182.50
2245.00
2282.50
2292.50
2230.00
2117.50
1982.50
From the table, we see that the optimal stocking level is 25 (which generates the maximum expected profit of Rs.2,292.50).
As it can be seen, this approach is tedious and the conditional profit table is bound to become unmanageable.
Describe the major financial problems of a firm The three questions posed above cover between them the major financial problems of a firm. Or we can say that financial manageme
a. You only need to complete the 2012 column, leave the 2011 column as is. b. Base you net income and certain other information needed from the income statement you completed in
State about the Detection risk This is the risk that auditors 'substantive procedures don't detect a material misstatement in an account balance or class of transactions. It is
What are the advantages and the disadvantages of a new stock issue? A new stock issue increases funds and decreases the riskiness of the firm. It as well tends to send a negat
Brandon Michael Chu of Henry Law & Yang Yi Capital Limited believes that earnings and dividends at Alua Amanova & Shuwen Wang Technologies (AST) will continue to grow at 12% per ye
The following are extracts of the Income Statement and Balance Sheet for Umar plc. Extract Balance Sheet at 30 June 20X2 20X1 £'000 £'000 £
Q. Show the Phase of Traditional Approach? Phase of Traditional Approach: According to the traditional approach the way in which the overall cost of capital and the value of th
Rationale for corporate governance The organization of the world economy (particularly in present years) has seen corporate governance gain prominence mostly since: Insti
Illustrate the term quality of benefits It is clear from Table that total returns associated with two alternatives are identical in a normal situation but range of variati
Various Types of Strategies Different types of hedge fund strategies are discussed as follows: Relative Value of Strategies: Relative value strategies are also known as no
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd