P1 Exam Dumps : Management Accounting

XY can choose from four mutually exclusive projects. The projects will each last for one year and their net cash inflows will be determined by market conditions. The forecast net cash inflows for each of the possible outcomes are shown below.

If the company applies the maximin criterion the project chosen would be:

Demand for two products, A and B is 1,000 units and 2,000 units respectively. Each unit of Product A requires 8 kg of material and each unit of Product B requires 5 kg of material. The maximum availability of material is 17,200 kg. Contribution per unit of A is $10 and per unit of B is $9.

Place the production volumes of Product A and Product B, that will maximize contribution, in the table.

A company has to choose between three mutually exclusive projects. Market research has shown that customers could react to the projects in three different ways depending on their preferences. There is a 30% chance that customers will exhibit preferences 1, a 20% chance they will exhibit preferences 2 and a 50% chance they will exhibit preferences 3. The company uses expected value to make this type of decision.

The net present value of each of the possible outcomes is as follows:

A market research company believes it can provide perfect information about the preferences of customers in this market.

What is the maximum amount that should be paid for the information from the market research company?