Aaaction Graphics, Inc

question 33

Multiple Choice

Aaaction Graphics, Inc. has a project that costs $400,000. It has a 30% chance of paying off $1,000,000 and a 70% chance of paying off $200,000. What is the expected payoff and the expected profit or loss from the new project?

• A) The expected payoff is $600,000, and the expected gain is $200,000.
• B) The expected payoff is $440,000, and the expected loss is $40,000.
• C) The expected payoff is $440,000, and the expected gain is $40,000.
• D) The expected payoff is $600,000, and the expected loss is $200,000.

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Definitions:

Lot Size

The number of units of a product that are manufactured or delivered in one batch, affecting inventory and production strategies.

Economic Production Lot Size

The optimal quantity of goods to produce in a single batch that minimizes the total production and holding costs.

Holding Cost

The expense of storing unsold goods, including warehousing, insurance, and depreciation costs.

Order Cost

Expenses related to making and processing an order for goods or services, encompassing production, procurement, and administrative costs.