The Demand for a Product Varies from Month to Month

question 11

Short Answer

The demand for a product varies from month to month. Based on the past year's data, the following probability distribution shows MNM company's monthly demand.
$$\begin{array} { c c } \text { x } & \text { fx) } \\\text { Unit Damand } & \text { Prabability } \\0 & 0.10 \\1,000 & 0.10 \\2,000 & 0.30 \\3,000 & 0.40 \\4.000 & 0.10\end{array}$$
a. Determine the expected number of units demanded per month.
b. Each unit produced costs the company $8.00, and is sold for $10.00. How much will the company gain or lose in a month if they stock the expected number of units demanded, but sell 2000 units?

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Definitions:

Underapplied

In accounting, underapplied refers to when the allocated overhead costs are less than the actual overhead costs incurred.

Direct Materials Cost

The expense associated with the raw materials directly used in the production of goods.

Unadjusted Cost

The initial cost of an item or service before any adjustments like discounts, allowances, or modifications are made.

Cost of Goods Sold

The specific costs incurred in the making of goods that a company sells, which include materials and labor.