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Star Companys manager, Tom, is thinking about production of a new product. Tom is considering...

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Accounting

Star Companys manager, Tom, is thinking about production of a new product. Tom is considering three different products. Tom would like to select a product with highest profit. Following table contains the expected selling price and costs for each product: Products ABC Selling price per unit Cost: Direct material coast per unit Direct labor cost per unit Variable overhead cost per unit Total Fixed costs $20.90 $5 $6 $1.4 $500,000 $30 $28.50 $8 $4 $7 $5.5 $2.5 $9 $900,000 $1,000,000 Probability 45% 30% 15% 10% Tom expects the same demand for all three products. Annual Demand in units 300,000 450,000 600,000 750,000 Require: Review Chapter 3 Appendix in text book, the PP slides and video for Chapter 3 Appendix and answer the following. Step 1: Identify a choice criterion. Step 2: Identify the set of alternative actions that can be taken. Step 3: Identify the set of events that can occur. Step 4: Assign a probability to each event that can occur. Step 5: Identify the set of possible outcomes. Calculate the expected value for each option

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