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| Chocoholics Anonymous Chocoholics anonymous are looking to launch 2 new products. The first is called Paradise and will require hire of additional equipment. The machines have varying capacities but they need to be ordered now before demand is known. The management accountant has prepared a table detailing the various possible profits that could arise depending on level of demand, contribution and the varying cost of equipment hired.  Those making the decision about the size of equipment that should be hired have conflicting views. One manager believes the equipment with a capacity of 2,000 boxes should be hired whereas the other thinks capacity of 3,000 boxes should be obtained.(a) Explain both managers’ attitude to risk. (4 marks) The other new product Dreamy contains a special ingredient which isn’t used by the groups other products. Due to fierce competition and an influx of new bars in the market recently the management of CA are a little uncertain as to the likely initial volumes. The new special ingredient can only be ordered in advance in quantities to fulfil demand of 1,000 boxes, 2,000 or 5,000 boxes of Dreamy so it is important to try and predict demand as accurately as possible. Based on launches of other new products in the past, initial demand is expected to be as follows: Quantity demanded Probability 1,000 boxes 20% 2,000 boxes 50% 5,000 boxes 30% The Dreamy will be sold onto retailers in boxes of 100. Each box will sell for $35. Variable costs including the cost of special ingredient X are $12 |