Question 3 (10 marks) Dishwasher Company currently earns an annual contribution of N$2 880 000 from...

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Question 3 (10 marks) Dishwasher Company currently earns an annual contribution of N$2 880 000 from the sale of 90 000 bottles of dishwashing liquid. Fixed costs are N$800 000 per annum. The management of Dishwasher Company is considering reducing the selling price per unit to N$48. The estimated levels of demand at the revised selling price and the probabilities of them occurring are as follows: Demand 100 000 120 000 Probability 0.40 0.60 The estimated variable costs per unit at either of the increased levels of demand and the probabilities of them occurring are as follows: Variable cost (per unit) N$21 N$19 Probability 0.25 0.75 The level of demand and the variable cost per unit are independent of each other. REQUIRED Marks 3.1. Calculate the total probability that the profit will increase from its current level if the selling price is reduced to N$48. 10 Total marks 10 Question 3 (10 marks) Dishwasher Company currently earns an annual contribution of N$2 880 000 from the sale of 90 000 bottles of dishwashing liquid. Fixed costs are N$800 000 per annum. The management of Dishwasher Company is considering reducing the selling price per unit to N$48. The estimated levels of demand at the revised selling price and the probabilities of them occurring are as follows: Demand 100 000 120 000 Probability 0.40 0.60 The estimated variable costs per unit at either of the increased levels of demand and the probabilities of them occurring are as follows: Variable cost (per unit) N$21 N$19 Probability 0.25 0.75 The level of demand and the variable cost per unit are independent of each other. REQUIRED Marks 3.1. Calculate the total probability that the profit will increase from its current level if the selling price is reduced to N$48. 10 Total marks 10

Answer rating: 100% (QA)

To calculate the total probability that the profit will increase from its current level if the selling price is reduced to N48 we need to determine th... View the full answer