My third and final question of Enterprise Performance Management of ICWAI final cc question is
1) Q3) Jiraram has developed a new pocket calculator to compete in the rapidly expanding home market. As a mangament accountant, you are consulted as to the viability of marketing this calculator.
Jiraram makes the following estimates after a great deal of research:
Sales level(units) Profit(Rs.)
360000 (900000)
450000 4500000
540000 9900000
The selling price will be Rs.150
a) Calculate the expected profit if the probabilities of sales for the above sales levels are:
Sales level(units) Probability
360000 0.2
450000 0.5
540000 0.3
b) Calculate the margin of safety based on (a) above
c) Jiraram’s pocket calculators are of two sizes, each of which varies from the other in respect of price and variable cost. The above estimates of Jiraram are the averages of the two sizes. After a discussion with you, Jiraram wants to know more of margin of safety and how to improve the margin of safety for his calculators.
Please do give reply to these questions to balugpl @ gmail.com or rrenji00 @ gmail.com
Thanks in advance for helping me. Try and reply soon
regards
renjitha