A company is planning to launch a new product. The price at which it will sell the product will be determined by the level of competition in the market which is currently uncertain. The possible selling prices and variable costs and their respective associated probabilities are as follows:
Selling price per unit Variable cost per unit $ Probability $ Probability 60 0·30 20 0·25 64 0·25 24 0·40 68 0·45 26 0·35
Selling price and variable cost per unit are independent of each other. Required: Calculate the probability of the contribution per unit being equal to or greater than $40.
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