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Expected value

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Expected value

  • This topic has 1 reply, 2 voices, and was last updated 2 months ago by John Moffat.
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  • Author
    Posts
  • November 26, 2022 at 3:15 pm #672643
    home001
    Participant
    • Topics: 5
    • Replies: 2
    • ☆

    The production of the company is
    2000
    4000
    The selling price is $20/unit and variable cost
    Is 4 . The comany is deciding the supply level
    The 20% of the production would be lost and lost would be scarp at $.4.
    Sir how we construct the payoff table sir i know from your lecture how to construct it but i am not able to take account of lost 20%

    November 27, 2022 at 9:11 am #672725
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51532
    • ☆☆☆☆☆

    If they produce 2000 then they will lose 400 (20% of 2,000) and will be able to sell 1,600.

    Therefore the cost will be 2,000 x $4 = $8,000, and the total revenue will be (1,600 x $20) + (400 x $4) = $33,600. The profit will be the difference.

    (Does the book in which you found the question not show the answer? 🙂 )

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