BDU Co is a manufacturer of baby equipment and is planning to launch a revolutionary new style of sporty pushchair. The company has commissioned market research to establish possible demand for the pushchair and the following information has been obtained. If the price is set at N$425, demand is expected to be 1 000 pushchairs, at N$500 it will be 730 pushchairs and at N$600 it will be 420 pushchairs. Variable costs are estimated at either N$l70, N$210 or N$260. A decision needs to be made on what price to charge
a) A table showing the expected contribution for each of the possible outcomes.
[b) Explain what is meant by maximax, maximin and minimax regret decision rules using the information in the scenario to illustrate your explanations. [12
c) identify any advantage and disadvantage of using Return on Capital Employed (ROCE) and the Residual Income (RI) as a performance measurement tools.
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