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.
Buying and Selling Securities One of the key features that may occur while investing in financial markets is that sometimes investors overlook the essential factors they should c
Q. Explain about receivables management? Receivable Management: - The term receivables demote to debt owed to the firm by the customers resulting from sale of goods or else ser
Linear programming, one of the important techniques of operations research, has been applied to a wide range of business problems. This techniqu
I need help solving problems for learning financial management?
Nick Leeson and Barings Leeson was the trader who managed to bring about the collapse of Barings Bank in 1995. The main reason he was able to do this was because there was a ce
Federal Agency Securities are those securities issued by federally related institutions and those issued by Government-Sponsored Enterprises (GSE). Securities iss
What considerations might limit the extent to which the theory of comparative advantage is realistic? Answer: The theory of relative advantage was initially advanced by the ninet
The payment that the issuer makes to the bondholder can be in any currency. The contract at the time of bond issue between the issuer and the investor can specify
What is Planning Internal auditors must plan the audit work so as to perform the audit in an effective manner.There must be sufficient audit programmes in existence which set o
the procedures, techniques or strategies that could or should be implemented to reduce the likelihood of harm > actions that could be taken to eliminate the hazard or reduce the r
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