P1 Exam Dumps : Management Accounting

A snowboard manufacturer is considering investing in technology that will give a good indication of how heavy snowfall will be in the future. The predictions tend to be reasonably accurate.

The current budgeted profit for the year is £2,560,000 but if they invest in this technology and it works, the expected profit will be £2,640,000. The manufacturer is willing to invest a maximum of £40,000 into the venture.

What is the expected profit if the investment is NOT made?

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?

Which THREE of the following are purposes of all budgets?