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Does anyone know how to calculate the expected value without perfect information = $1,648.25 (at supply level 775 lunches)
Thanks in advance
Another question, which is Question 20 with same case. For statement 1, the investment is more sensitive to a change in sales volume than sales price.
Refer to the answer given,
The investment is more sensitive to a change in sales price of 29.6%, so the aforesaid statement is incorrect.My understanding is if the sales volume increased, profit generated increased as well. Why sales volume is not relevant in this case?
Thanks in advance for the guidance. 🙂
If you ask in this forum, then ‘anyone’ will always be me since I am the tutor for Paper F5!!
From the table given in the question, the expected value for a supply of 775, without perfect information is:
(810 x 0.15) + (1395 x 0.3) + (2015 x 0.40) + (2015 x 0.15) = 1648.25Have you not watched my free lectures on decision making under uncertainty? The lectures are a complete free course for Paper F5 and cover everything needed to be able to pass the exam well.
Why do you say sales volume is is not relevant? It is relevant because you need to know whether it is more sensitive to sales volume or sale price.
If sales price changes, then only the revenue changes. If sales volume changes, then sales revenue and variable costs both change – i.e. the contribution changes.
Thanks Mr. John for your prompt replied. 🙂 I have watched your lectures and it’s really give a lot of help on my self-study route. Thanks a bunch for your free lectures and notes and MCQ test as well. Words can’t express how thankful I am. However, I’m only able to cover until Chap 11 due to insufficient of time as the exam on this week Wednesday. 🙁
Time management for self-study students is important !!! Well, just try my best and take this batch of exam as an experience.
Perhaps I should give bell curve god offering now….
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