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.
Setting Budget Goals and Objectives: Having collected and analysed all relevant information, and made general forecasts as to the key areas of concern / opportunity and special
A callable bond is the sale of a call option by the investor to the issuer as it allows the issuer to repurchase the bond from the time it becomes callable until
Q. Explain about Pay Back Method? Pay Back Method (PB) :- The payback process is the simplest method. This method computed the number of years required to pay back the original
Define the basic motivations for a counterparty to enter into a currency swap. Answer: One major reason for a counterparty to enter into a currency swap is to exploit the comp
Goal of Shareholders wealth maximisation Shareholders' wealth maximisation goal gives us the best results since effectsof all the decisions taken by company and its managers ar
Disadvantages of IFRS 8 Reconciliations may be time consuming. Less comparable with other organisations, as every entity has a different way of running their business.
Accounting Principle Accounting principles are the primary assumptions, rules of operation, and necessary features that make up the framework for the construction of accountin
How competitive is the market for banking services? A: With above 7,000 banks and thrifts in the U.S., banking is one of the so many competitive industries in the world. Refer
TRADING IN OPTIONS We have already seen that options are traded on exchanges and have already discussed how to understand published quotations. Let us now learn the trading mec
Weighted Average Cost of Capital Weighted average cost of capital is the average cost of the costs of several sources of financing. Weighted average cost of capital is also kn
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