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
State the Working capital turnover ratio  Meaning: this ratio establishes a relation ship among net sales and working capital. Working capital turnover ratio shows the vel

Advantages and Limitations of Dynamic Programming Advantages: (1) In certain types of problems such as inventory control management, Chemical Engineering design, dynamic

THE BREAK EVEN POINT

Recognition of the Organization's Decision Units and Decision Packages ZBB decision unit is an operating division for which decision packages are generated and analyzed. It ca

Cash budget is a detailed budget of income and cash expenditure including both capital and revenue items. For control reasons the year's budget is usually phased in smaller periods

What are the Changing role of management accounting 1. Focus on customer scarification: customer satisfactions are continuously gaining high priority in management thinking i

Case Study Labor standards Geeta & Company has experienced increased production costs. The primary area of concern identified by management is direct labor. The company is conside


State Budgetary Control A budget is a quantitative expression of a plan of action relating to the forthcoming budget period. It represents a written operational plan of managem