Using probabilities in budget estimates The Wing Manufacturing Corporation produces a chemical compound, product X, which deteriorates and must be discarded if it is not sold by the end of the month during which it is produced. The total variable cost of the manufac- tured compound, product X, is $50 per unit and its selling price is $80 per unit. Wing can purchase the same compound from a competing company at $80 per unit plus $10 freight per unit. Management has estimated that failure to fill orders would result in the loss of 80 percent of customers placing orders for the compound. Wing has manufactured and sold product X for the past 20 months. Demand for product X has been irregular and at present there is no consistent sales trend. During this period monthly sales have been as follows:

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Units Sold Number of per Month 8,000 Months 5 9,000 12 10,000 3