Find the Expected Value of the Random Variable

question 63

Multiple Choice

Find the expected value of the random variable. Round to the nearest cent unless stated otherwise.
-A contractor is considering a sale that promises a profit of $27,000 with a probability of 0.7 or a loss (due to bad weather, strikes, and such) of $2000 with a probability of 0.3. What is the expected
Profit? Round the answer to the nearest dollar.

• A)$18,300
• B)$20,300
• C)$25,000
• D)$18,900

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Definitions:

Weighted-Average Method

An inventory valuation method where costs of goods sold and ending inventory values are based on the average cost of all items available for sale.

Assembly Department

A division within a manufacturing facility where parts are put together to make a final product.

Cost Reconciliation Report

A document summarizing the costs in a production process, comparing expected costs to actual costs, and explaining differences or variances.

Weighted-Average Method

A cost accounting method used to calculate the cost per unit of inventory by considering the weighted average of the costs of the items available for sale.