Warning: foreach() argument must be of type array|object, bool given in /var/www/html/web/app/themes/studypress-core-theme/template-parts/header/mobile-offcanvas.php on line 20

Gary’s Pipe and Steel Company expects sales next year to be \(800,000 if the economy is strong, \)500,000 if the economy is steady, and $350,000 if the economy is weak. Gary believes there is a 20 percent probability the economy will be strong, a 50 percent probability of a steady economy, and a 30 percent probability of a weak economy. What is the expected level of sales for next year?

Short Answer

Expert verified

The expected level of sales for next year is$500,000.

Step by step solution

01

Information given in the question

The following information is provided:

Expected sales whentheeconomy is strong = $800,000

Expected sales whentheeconomy is steady = $500,000

Expected sales whentheeconomy is weak = $300,000

Probability of strong economy = 20%

Probability of steady economy = 50%

Probability of weak economy = 30%

02

Expected sales for next year

Expectedsalesfornextyear=Expectedsales×Probability=800,000×0.2+500,000×0.5+300,000×0.3=$160,000+$250,000+$90,000=$500,000

The expected level of sales for next year is $500,000.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Study anywhere. Anytime. Across all devices.

Sign-up for free