TABLE 5-7 Two Different Designs on a New Line of Winter Jackets

question 92

Short Answer

TABLE 5-7
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.

-Referring to Table 5-7, what is your expected profit when Design A is chosen?

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Definitions:

Variable Cost

Costs that vary directly with the level of production or output.

Fixed Cost

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.

Variable Costs

Expenses that change in proportion to the activity or production level of a business.