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
Painter Ltd, which manufactures and sells a single product, is currently producing and selling 102,000 units per month, which represents 85% of its full capacity. Total monthly cos

Various stages of product life cycle Typically the life cycle of a manufactured product will consist of the following stages: 1) market research : before any investment in

Illustration of Graphic Analysis The four steps of cost-volume-profit analysis can be employed to graph and study any cost-volume relationship. Suppose that you have been aske

Risk : Risk includes circumstances or events that may or may not take place though whose probability of occurrence can be predicted from the past records. In this atmosphere, t


what do you debit and what do you credit in adjusting entry for prepaid rent?

Transportation model Table A more compact method for representing the transportation model than the linear equations is to use what we call the transportation tableau. It is a

critically examine the current cost accounting for price level changes

Planning Planning is the fundamental function of the management by means of which the managers decide: What goals are to be accomplished How they will be accomplished.

Calculate Transfer Price - Management Control System? Question: Compute the Transfer Price for Product X and Y and the Standard Cost of Product Z as the intra company pricing r