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katrin [286]
3 years ago
15

Assume that each unit demanded generates $70 in revenue and that each unit ordered costs $50. How much will the company gain or

lose in a month (in dollars) if it places an order based on your answer to part (a) and the actual demand for the item is 300 units
Business
1 answer:
Vanyuwa [196]3 years ago
4 0

Answer:

Note: The full question is attached as picture below

a. Let X is denoted as company’s monthly demand, P(X=x) is denoted as the probability of the company’s monthly demand.

The expected value is obtained below:

E(X) = (300*0.20) + (400*0.30) + (500*0.35) + (600*0.15)

E(X) = 60+120+175+90

E(X) = 445

b. The expected value of the monthly demand is 445. The each unit demands the revenue to generate is $70 and their cost is $50.

The gain/loss of the company = (300*(70−50)) - (145*50)

The gain/loss of the company = (300*20) - (145*50)

The gain/loss of the company = 6,000 - 7,250

The gain/loss of the company =−$1,250(Loss)

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