Your company is considering two products for a new market. The probability distribution for the demand for...

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Basic Math

Your company isconsidering two products for a new market. The probabilitydistribution for the demand for the two products is presented inthe table below. Q(A) and Q(B) are the possible quantities of eachproduct that could be sold. P(A) and P(B) are the probabilities ofselling the corresponding quantities.
Q(A)
P(A)
Q(B)
P(B)
10000
0.15
10000
0.25
30000
0.20
30000
0.30
50000
0.40
50000
0.35
60000
0.25
60000
0.15
You have the followingadditional information: The projected selling price for DESIGN "A"is $60. The fixed cost of its production is$75,000. Its variablecost is $35 a unit. The selling price for DESIGN "B" is $80. Itsfixed cost of production is $110,000. Variable cost of productionis $48 a unit.
Which project isexpected to be more profitable?

Answer & Explanation Solved by verified expert

4.4 Ratings (938 Votes)

Expected Profit Unit selling price Variable Cost per unitx Expected selling Quantity Fixed CostExpected selling Quantity for the Design AQAPAQAPA100000151500300000260005000004200006000002515000EQA42500Expected selling Quantity See Answer

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Q(A)	P(A)	Q(B)	P(B)
10000	0.15	10000	0.25
30000	0.20	30000	0.30
50000	0.40	50000	0.35
60000	0.25	60000	0.15