SCENARIO 5-12
Two Different Designs on a New Line of Winter

question 365

Short Answer

SCENARIO 5-12
Two different designs on a new line of winter jackets for the coming winter are available for your
manufacturing plants. Your profit (in thousands of dollars) will depend on the taste of the consumers
when winter arrives. The probability of the three possible different tastes of the consumers and the
corresponding profits are presented in the following table. $$\begin{array} { | c | c | r | r | } \hline \text { Probability } & \text { Taste } & \text { Design A } & \text { Design B } \\\hline 0.2 & \text { more conservative } & 180 & 520 \\\hline 0.5 & \text { no change } & 230 & 310 \\\hline 0.3 & \text { more liberal } & 350 & 270 \\\hline\end{array}$$
-Referring to Scenario 5-12, if your investment preference is to minimize the amount of risk that
you have to take and do not care at all about the expected profit, will you choose a production
mix that will consist of 10%, 30%, 50%, 70%, or 90% of your production lines for Design A and
the remaining for Design B?

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Definitions:

Summit of the Volcano

The highest point or peak on a volcano, which is often the location of the central vent or crater.

Mudflow Deposits

Sedimentary accumulations resulting from the flow of mud, often triggered by volcanic activity or heavy rainfall, that can cover large areas and solidify over time.

Landslide Blocks

Large pieces of earth, rock, or debris that move downhill rapidly due to gravity, often caused by saturation from rainfall or seismic activity.

Location of Rock

The specific geographical placement or setting where a rock formation is found.