CVP under uncertainty. (J. Patell) In your new position as supervisor of product introduction, you have to decide on a pricing strategy for a talking doll specialty product with the following cost structure:

The dolls are manufactured upon receipt of orders, so the inventory levels are insignificant. Your market research assistant is very enthusiastic about probability models and has presented the results of his price analysis in the following form:

a. Ifyou set the selling price at $120 per unit, the probability distribution of revenues is uniform between $360,000 and $720,000. Under this distribution, there is a 0.50 probability of equalling or exceeding revenues of $540,000.

b. If you lower the selling price to $84 per unit, the distribution remains uniform, but it shifts up to the $720,000-$1,080,000 range. Under this distribution, there is a 0.50 probability of equalling or exceeding revenues of $900,000.LO1

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Variable costs per unit Fixed costs 60 $ $240,000