Question

The Brady & Matthew Camera Company has just come out with their newest professional quality digital camera, the ToughPix1. The company is selling this camera only through its new mobile app at a profit of $221 per camera. This purchase comes with a guarantee that, barring gross negligence, if the camera breaks in the first two years after purchase, Brady & Matthew will replace it free of charge. Replacing a camera in this way costs the company $4900. Suppose for each ToughPix1 there is a 3% chance that it will need to be replaced exactly once, a 2% chance that it will need to be replaced exactly twice, and a 95% chance that it will not need to be replaced.

Answer 1

Answer:

Brad & Matthew can expect to lose money from selling these cameras of -$122

Step-by-step explanation:

Calculation to determine if it should expect to make or lose money from selling them and How much?

First step is to calculate the expected costs

Expected costs= (0.03* $4900 ) + (0.02* $4900 * 2)

Expected costs=$147+$196

Expected costs=$343

Now let determine the amount of profit or Loss that the company will be making in the long-run on each camera sold

Expected Profit or loss =($221-$343)

Expected Profit or loss =-$122

Therefore it Should expect to LOSE money from selling them of the amount of -$122