Dear Friends,
Can you please explain the deterministic approach in probability analysis in this question?
Thank you in advance..
Regards
Gleason Co. has two products, a frozen dessert and ready-to-bake breakfast rolls, ready for introduction. However, plant capacity is limited, and only one product can be introduced at present. Therefore, Gleason has conducted a market study at a cost of $26,000, to determine which product will be more profitable. The results of the study follow.
Sales of Desserts at $1.80/unit
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Sales of Rolls at $1.20/unit
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250,000
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.30
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200,000
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.20
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300,000
|
.40
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250,000
|
.50
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350,000
|
.20
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300,000
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.20
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400,000
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.10
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350,000
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.10
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The costs associated with the two products have been estimated by Gleason's cost accounting department and are as follows:
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Ingredients per unit
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$ .40
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$ .25
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Direct labor per unit
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.35
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.30
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Variable overhead per unit
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.40
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.20
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Production tooling*
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48,000
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25,000
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Advertising
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30,000
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20,000
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*Gleason treats production tooling as a current operating expense rather than capitalizing it as a fixed asset.
Applying a deterministic approach, Gleason's revenue from sales of frozen desserts would be
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TIMUCIN ONER
Director/Manager
ANTALYA
Turkey
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