Question
A shoe producer makes a variety offootwear, including indoorslippers, children'sshoes, andflip-flops. To keep up with increasingdemand, it is considering three expansionplans: (1) a small factory
A shoe producer makes a variety offootwear, including indoorslippers, children'sshoes, andflip-flops. To keep up with increasingdemand, it is considering three expansionplans: (1) a small factory with yearly costs of $150,000 that will increase the production offlip-flops by 400,000; (2) amid-sized factory with yearly costs of $250,000 that will increase the production offlip-flops by 600,000; and(3) a large factory with yearly costs of $350,000 that will increase the production offlip-flops by 900,000. The profit perflip-flop is projected to be $0.75. The probability distribution of the increased demand forflip-flops is provided. Let x represent the amount of profit the producer will make.
x P(x)
300,000 .3
750,000 .4
900,000 .3
Compute expected profit for each expansion:
Small Plan E(x) =
Mid-Sized Plan E(x) =
Large Plan E(x) =
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