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Dear Tr.Moffat,
Kit Q. 143 (2) The use of expected values and probabilities in budgeting is most useful when there is a high level of uncertainty about the future.
The answer is false.May I know the reason of false?
Thanks.
May
I do not know which Kit you are referring to. The question is certainly not from the current edition of the BPP Revision Kit (and I only have the BPP Kit).
You will know from my free lectures that the expected value is simply the average of the possible outcomes and that it also relies on us knowing the probabilities of the various outcomes. The actual outcome will not be the average – it will be one of the possible outcomes.
The more uncertain things are then the less certain we will be of the probabilities and the less likely the actual outcome will be anything close to the expected value.
If there is high uncertainty then it would make more sense to prepare several budgets in order to see what the likely result would be for each of the possible outcomes.
Dear Sir,
Thank you Teacher. If so, I can say, my question should be true right?
May
No. The statement is not true. As I explained in my previous reply, when there is high uncertainty using expected values is not useful. Read again the last two sentences of my reply.
Noted and got it Sir. My one is also BPP Kit. I have not idea why not the same with yours.
I am doing self study and I have mentioned my BPP Kit number. If not the same with yours. I will be careful not telling about question number.
If my question is silly, do apologize teacher.May.
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