fixed costs are likely to be around rs 35 000 per annum which price the firm should 608751

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A firm is considering two alternative prices for its new product which is expected to be marketed very soon. The sales department wants the price to be Rs. 20 per unit whereas the top management wants that the price be fixed at Rs. 22 per unit. To resolve the issue, data were collected from the Market Research and the Production Department. The data are as follows:

Expected sales distribution per annum if the price is Rs. 20 per unit:

Sales in Units Don't use plagiarized sources. Get Your Custom Essay on fixed costs are likely to be around rs 35 000 per annum which price the firm should 608751 Get an essay WRITTEN FOR YOU, Plagiarism free, and by an EXPERT! Just from $10/Page Order Essay	Probability
5000	.20
5500	.50
6000	.30

Expected sales distribution per annum if the price is Rs. 22 per unit:

Sales in Units	Probability
4,500	.10
5,000	.40
5,500	.50

Estimated costs for production up to 6,500 units:

Variable cost Per unit	Probability
Rs. 10	.30
Rs. 11	.70

Fixed costs are likely to be around Rs. 35,000 per annum. Which price the firm should choose? Show your workings nearly.

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