A Retailer Is Deciding How Many Units of a Certain

question 37

Multiple Choice

A retailer is deciding how many units of a certain product to stock. The historical probability distribution of sales for this product is 0 units, 0.2; 1 unit, 0.3; 2 units, 0.4, and 3 units, 0.1. The product costs $10 per unit and sells for $33 per unit. What is the smallest conditional value (profit) in the entire payoff table for this scenario?

• A) $-30 profit
• B) $3 profit
• C) $36 profit
• D) $66 profit
• E) $75 profit

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Definitions:

Adjusting Entry

A journal entry made at the end of an accounting period to allocate income and expenditures to the appropriate period for accurate financial reporting.

Sales Revenue Section

The part of a financial statement that details the income generated from sales of goods or services before any costs or expenses are subtracted.

Merchandising Company

A business that purchases goods wholesale and sells them retail; primarily involved in the selling of merchandise.

Gross Profit

The amount by which sales revenue exceeds the cost of goods sold, prior to the subtraction of administrative and other expenses.