Laplace criterion of rationality, Managerial Accounting

Laplace Criterion of Rationality

This criterion holds that if decision makers do not know the probabilities of the various states of nature and have no reason to think otherwise, then the states of nature should be considered to be equally likely. On the basis of this supposition, the predictable monetary value for each alternative is calculated and the alternative with the highest expected monetary value is chosen.

204_Untitled.jpg


Workings:

EMV Sh.4 = 1/3 (12000) + 1/3 (8000) + 1/3 (0) = 6667
Others are computed in the same way.

Decision:

Set a price of Sh.4.00 since it maximizes the expected monetary value.

 

Posted Date: 12/4/2012 7:08:43 AM | Location : United States







Related Discussions:- Laplace criterion of rationality, Assignment Help, Ask Question on Laplace criterion of rationality, Get Answer, Expert's Help, Laplace criterion of rationality Discussions

Write discussion on Laplace criterion of rationality
Your posts are moderated
Related Questions
Hickory Company manufactures two products—14,000 units of Product Y and 6,000 units of Product Z. The company uses a plantwide overhead rate based on direct labor-hours. It is cons

what is cross elasticity of demand? is it positive for substitute or compliments? show in a diagram relating to the demand for the coffee to the price of tea

What is the definition of internal controls

Standard conventions in Game Theory Consider the following table as shown below: X plays row I, Y plays Column I, X wins 3 points X plays row I, Y plays Column II, X los


Parameter prediction error: This is another aspect of faulty planning. As Hongren says, ‘planning decisions are based on predictions of future costs, future selling price, fut

Difficulties in cost reduction 1) Resistance by employees to pressure to reduce cost usually because the nature and purpose of the campaign has not been properly explained to t

Explain Out of pocket cost A cost which will have to be paid to outsides as against cross such as depreciation, which do not require any cash payment this cost is relevant in t

Types of Simulation 1) Operational Gaining Method: This refers to those situations involving conflict of interest among players or decision makers within the framework o

what are the factors should be considered before terminated the operation of a losing firm??