Use the Following to Answer Questions

question 87

Multiple Choice

Use the following to answer questions:
Scenario: Diversification
Morris is considering investing $10,000 in a sunglass company or a rain poncho company. If it is a rainy year and he invests only in the sunglass company, he will lose $5,000. However, if it is a rainy year and he invests only in the rain poncho company, he will earn $10,000. If it is a sunny year and he invests only in the sunglass company, he will earn $10,000; if he invests only in the rain poncho company, he will lose $5,000 in a sunny year. There is a 50% chance of a sunny year and a 50% chance of a rainy year.
-(Scenario: Diversification) Look at the scenario Diversification. If Morris invests half of his money in the sunglass company and half in the rain poncho company, he will earn _____ in a sunny year and _____ in a rainy year.

• A) $2,500; $0
• B) $1,250; $1,250
• C) -$2,500; $2,500
• D) $2,500; $2,500

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Definitions:

Directing

The managerial process of influencing people's behavior to achieve organizational goals.

Estimated Manufacturing Costs

The projected or forecasted costs associated with the production of goods, including estimates for materials, labor, and overhead before the actual production takes place.

Production Levels

The amount of output or goods a company produces within a specific period, indicating the scale of its production operations.

Units Per Month

The quantity of products or services that a company produces or sells in a month.