1.0 1.0 Determine the expected value of the contribution 1.0

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter9: Decision Making Under Uncertainty
Section9.3: Single-stage Decision Problems
Problem 5P
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A. A company wants to produce a souvenir with a marketing life of six
months. Uncertainty surrounds the likely sales volume as well as the
fixed costs of the venture as shown below:
Sales units
Probability Contrn. /unit Probability Fixed cost
K7
K5
100 000 0.3
80 000
0.6
60 000
0.1
1.0
0.5
0.5
1.0
Determine the expected value of the contribution
K400 000
K450 000
K500 000
Probability
0.2
0.5
0.3
1.0
Transcribed Image Text:A. A company wants to produce a souvenir with a marketing life of six months. Uncertainty surrounds the likely sales volume as well as the fixed costs of the venture as shown below: Sales units Probability Contrn. /unit Probability Fixed cost K7 K5 100 000 0.3 80 000 0.6 60 000 0.1 1.0 0.5 0.5 1.0 Determine the expected value of the contribution K400 000 K450 000 K500 000 Probability 0.2 0.5 0.3 1.0
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