Question

Question 9 (Decision Rules) Suppose the budgeted demand for product X will be 11500 units if the price $10, 8500 units if the price is $12 and 5000 units if the price is $14. Variable costs are estimated at either $4, $5, or $6 per unit. A decision needs to be made on the price to be charged. Here is a contribution table showing the budgeted contribution for each of the nine possible outcomes: Demand Price Variable Cost Unit Total Contribution Contribution 11500 11500 11500 8500 8500 8500 5000 5000 5000 69000 57500 46000 68000 59500 51000 50000 45000 40000 Required: State which price should be set using each of the decision rules: maximax, maximin and minimax regret criteria