Solved

Question of probability

Posted on 2016-07-29
6
76 Views
Last Modified: 2016-07-30
I just don't understand the way this question is solved. Can you please do it in a different way?  Thanks.

A shoe producer makes a variety of footwear, including indoor slippers, children's shoes, and flip-flops. To keep up with increasing
demand, it is considering three expansion plans: (1) a small factory with yearly costs of $150,000 that will increase the production of flip-
flops to 400,000; (2) a: mid-sized factory with yearly costs of  $250,000 that will increase the production of  flip-flops to 600,000; and (3)
a large factory with yearly costs of $350,000 that will increase the production of flip-flops to 900,000. The profit per flip-flop is projected
to be $0.75. The probability distribution of the increased demand for flip-flops is provided. Let x represent the amount of profit the
producer will make.

Complete parts a through c below.

Small Plan E(x)=       (Type an integer or a decimal.)
Mid-Sized Plan E(x) =   (Type an integer or a decimal.)
Large Plan E(x) =      (Type an integer or a decimal.)

b. Calculate the standard deviation for each of the expansion plans.

Small Plan Sigma(x) =     (Round to the nearest whole number as needed.)
Mid-Sized Plan Sigma(x) =   (Round to the nearest whole number as needed.)
Large Plan Sigma(x) =   (Round to the nearest whole number as needed.)

c. Which expansion plan would you suggest Provide the statistical reasoning behind your selection.
The (a.large, b.small, c.mid-size) plan has the largest expected profit. This plan has a much (a.higher, b.lower) standard deviation than the

other plans so this would be a good choice for those who can absorb (a.less, b.more)  risk than the other plans.

SOLUTION
---------------

screenshot.jpgscreenshot2.jpg
0
Comment
Question by:mustish1
  • 3
  • 2
6 Comments
 
LVL 78

Accepted Solution

by:
David Johnson, CD, MVP earned 250 total points
Comment Utility
Costs      Production      Proffit      Net Profit      BreakEven Units  break even as percentage of capacity
Small      150000      400000           300000      150000            200000                     50%
Medium      250000      600000         450000      200000           333333                      56%
Large      350000      900000        675000            325000          466667                        52%
Small and Large have break even units at about 50% capacity
0
 

Author Comment

by:mustish1
Comment Utility
This question is kind of hard for me. Can you please elaborate it.
0
 
LVL 27

Assisted Solution

by:aburr
aburr earned 250 total points
Comment Utility
The problem is impossible to solve with the data given.
1.What is p(x)?
2. There is no mention of standard deviation.

As you have recognized, the critical info is the probability of selling the product.
-
Random thoughts:
It appears that the cheapest producing factory is 2
Build two 2 rather than one of any other
cost of operating factory not given (or needed for your problem)
0
IT, Stop Being Called Into Every Meeting

Highfive is so simple that setting up every meeting room takes just minutes and every employee will be able to start or join a call from any room with ease. Never be called into a meeting just to get it started again. This is how video conferencing should work!

 

Author Comment

by:mustish1
Comment Utility
I am sorry i miss some data.

Demand      Probability
350000      0.1
700000      0.4
900000      0.5
0
 
LVL 27

Expert Comment

by:aburr
Comment Utility
I have difficulty understanding your additional info.
does it mean that the probability of a demand of 350000 is 1/10
and that the probability of a demand of 700000 is greater at 4/10?
seems unlikely (read impossible)
0
 

Author Closing Comment

by:mustish1
Comment Utility
Thanks.
0

Featured Post

How your wiki can always stay up-to-date

Quip doubles as a “living” wiki and a project management tool that evolves with your organization. As you finish projects in Quip, the work remains, easily accessible to all team members, new and old.
- Increase transparency
- Onboard new hires faster
- Access from mobile/offline

Join & Write a Comment

Phishing is at the top of most security top 10 efforts you should be pursuing in 2016 and beyond. If you don't have phishing incorporated into your Security Awareness Program yet, now is the time. Phishers, and the scams they use, are only going to …
Learn more about the importance of email disclaimers with our top 10 email disclaimer DOs and DON’Ts.
Articles on a wide range of technology and professional topics are available on Experts Exchange. These resources are written by members, for members, and can be written about any topic you feel passionate about. Learn how to best write an article t…
Where to go on the main page to find the job listings. How to apply to a job that you are interested in from the list that is featured on our Careers page.

744 members asked questions and received personalized solutions in the past 7 days.

Join the community of 500,000 technology professionals and ask your questions.

Join & Ask a Question

Need Help in Real-Time?

Connect with top rated Experts

8 Experts available now in Live!

Get 1:1 Help Now