Point estimate of probabilities, Managerial Accounting

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POINT ESTIMATE OF PROBABILITIES

This approach requires a number of different values for each of the uncertain variables to be selected. These might be values that are reasonably expected to occur but usually 3 values are chosen. These are as follows:

(A) The worst possible outcome.
(B) The most likely outcome.
(C) The best possible outcome.

For each of these 3 values, a probability of occurrence will be estimated.


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