Question 36
A decision tree is being evaluated back to a decision point.
There are two alternatives at this point:
1. To abandon the project and generate a return of $435,000;
2. To continue with the project and generate the following possible returns:
What value should be included at the decision point?
Question 37
Which of the following distinguishes risk from uncertainty?
Question 38
The labour requirement for a special contract is 250 skilled labour hours paid at $10 per hour and 750 semi-skilled labour hours paid at $8 per hour.
At present, skilled labour is fully utilised on other contracts which generate a $12 contribution per hour, after charging labour costs. Additional skilled labour is unavailable in the short term.
There is a surplus of 1,200 semi-skilled hours over the period of the contract but the firm has a policy of no redundancies.
The relevant cost of labour for the special contract is:
Question 39
A company is launching a new product with a selling price of $20.
Demand and variable cost are both uncertain and possible demand levels and variable costs are given below:
Outcomes for demand and variable cost are independent.
What is the expected contribution from the product?
Give your answer as a whole number.
Question 40
The performance of a production manager is assessed on efficient use of materials during the production process.
Actual data and data from the fixed budget for Month 4 are as follows:
What figures should be compared in order to assess the production manager's performance for Month
4?