Minimal regret criterion-laplace criterion of rationality, Managerial Accounting

Assignment Help:

Minimal Regret Criterion:

This method seeks to minimize the maximum regret that would occur from choosing a particular strategy or alternative. 

The regret is the opportunity loss that occurs from taking one decision given that a certain contingency occurs.

For each state of nature:
Opportunity loss = Max pay off – Payoff under each alternative

2444_Untitled.jpg


Decision:
Set a price of Sh.4.00 since it minimizes the maximum regret

Methods of Decision Making Under Risk:

In this environment, it is possible to attach probabilities to the various states of nature.  The decision criteria would either be:

  • The expected monetary value
  • The expected opportunity loss

 

The two criteria are same as the choice that maximizes the expected monetary value also minimizes the expected opportunity loss (EOL).

 


Related Discussions:- Minimal regret criterion-laplace criterion of rationality

Explain the cost accounting, Explain the Cost accounting:         Meani...

Explain the Cost accounting:         Meaning and definition: Cost accounting is the process of accounting for cost which begins with the incurrence of cost and ends with th

What are the classification and computation of variances, Classification an...

Classification and computation of variances The computation and analysis of variances is the main aim of standard costing. The variance is the difference among the standard pe

Advantages of transfer pricing, Advantages of Transfer Pricing (a) Tran...

Advantages of Transfer Pricing (a) Transfer pricing is similar to cost apportionment and allocation in that values of one department are passed to another. For cost apportionme

Human behavior and budgetary control, Human behavior and budgetary control ...

Human behavior and budgetary control An important feature of control in business is that control is exercised by managers over people. Their attitudes and response to budgetary

Cost-volume profit analysis , COST-VOLUME PROFIT (C-V-P) ANALYSIS INTRODUCT...

COST-VOLUME PROFIT (C-V-P) ANALYSIS INTRODUCTION You can employ cost-volume-profit analysis to examine the natural relationship among cost, volume, and profit in pricing decision

Two jobs during the period, The Work in Process account for Monty's Company...

The Work in Process account for Monty's Company contained the following entries: Work in Process Account Debit of $40,000 for direct raw materials Debit of $60,000 for direct labor

What is budgetary control, What is Budgetary control Budgetary control...

What is Budgetary control Budgetary control is the process of determining various budgeted figures for the enterprises for the future period and then comparing the budgeted fi

Costs classification, identify and explain the many classification of costs...

identify and explain the many classification of costs for planning, control.performance evaluation and decision making.

Explain variable cost and fixed cost, Explain variable cost and fixed cost ...

Explain variable cost and fixed cost Variable costs: costs that vary almost in the direct proportion to the volume of production are known as variable costs. The examples of

Extra shift decision, EXTRA SHIFT DECISION These decisions are concerne...

EXTRA SHIFT DECISION These decisions are concerned with whether or not a company should work for 8 hrs, 16hrs, or 24 hrs a day or week days only or weekends also.  The factors

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd