Global Radio Company, which is trying to decide whether to introduce as a new product a wrist "radio- watch" designed for shortwave reception of exact time as broadcast by the National Bureau of Standards. The "radio-watch" would be priced at P 40, which is exactly twice the variable cost per unit to manufacture and sell it. The incremental fixed costs necessitated by introducing this new product would amount to P240,000 per year. Subjective estimates of the probable demand for the product are shown in the following probability distribution: Annual demand Probability
Global Radio Company, which is trying to decide whether to introduce as a new product a wrist "radio- watch" designed for shortwave reception of exact time as broadcast by the National Bureau of Standards. The "radio-watch" would be priced at P 40, which is exactly twice the variable cost per unit to manufacture and sell it. The incremental fixed costs necessitated by introducing this new product would amount to P240,000 per year. Subjective estimates of the probable demand for the product are shown in the following probability distribution: Annual demand Probability
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Global Radio Company, which is trying to decide whether to introduce as a new product a wrist "radio-
watch" designed for shortwave reception of exact time as broadcast by the National Bureau of Standards.
The "radio-watch" would be priced at P 40, which is exactly twice the variable cost per unit to manufacture
and sell it. The incremental fixed costs necessitated by introducing this new product would amount to
P240,000 per year. Subjective estimates of the probable demand for the product are shown in the following
probability distribution:
Annual demand Probability
6,000 units
8,000 units
10,000 units
12,000 units
14,000 units
16,000 units
20%
25%
15%
15%
15%
10%
The probability that the introduction of this new product will not increase company's profit is:
a. 20%
b. 60%
C. 75%
d. 90%
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