pQuestion 8.32 amount chargeable to its clients in respect of a special advisory service about the Oriowo and company is a firm of Chartered Accountants and is trying to determine the implications of major tax changes made in the last year budget. To rates per hour are under Charge per Hour: N3,000 Probability Revenue N000 High Estimate Low Estimate Most Likely Estimate 0.15 0.30 0.55 8,000 4,200 3.700 6,600 0.10 0.35 Charge per Hour: A4,000 Probability Revenue A 000 High Estimate Low Estimate 3,600 Most Likely Estimate 0.55 5,000 Fixed costs associated with this new proposal will not be affected by the volume of work, but there are some uncertainties as to the amount involved: High Estimate Low Estimate Most Likely Estimate Probability Revenue N''000 0.20 2,800 0.20 2,000 0.60 2,300 Oriowo and company incur low variable costs and contribution is confidently expected to be 90% of sales revenue. You are required to determine: (a) The expected profit or loss for each proposed charge per hour. (10.50 Marks) (b) Which charge rate should be adopted assuming that management objective is to maximize the expected value of profit (1.50 Marks) (e) What managerial attitude to risk is implicit in (a) and (b) above? (2 Marks) ICAN (Nov 2007) MA