A Farm Owner Has Three Possible Hiring Decisions

question 12

Multiple Choice

A farm owner has three possible hiring decisions.His profits depend on the growing season as shown below.If the probability of a good growing season is 0.75.What is the expected value of hiring teenagers?

• A)$62,500
• B)$52,500
• C)$46,250
• D)$12,990
• E)None of the above.

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Definitions:

Net Income

The amount of revenue left over after all expenses and taxes have been deducted.

Variable Costing

Variable costing is an accounting method in which only variable production costs (direct materials, direct labor, and variable manufacturing overhead) are included in the cost of goods sold, with fixed overhead expenses treated as period costs.

Variable Overhead

The overhead costs that fluctuate with the level of production activity, such as utilities and materials used in production.

Product Costs

The costs directly associated with the production of goods, including materials, labor, and manufacturing overhead.