Question

7. The XYZ Office Supplies Company sells calculators in bulk at wholesale prices, as well as individually at retail prices. Next year's sales depend on market conditions, but executives use probability to find estimates of sales for the coming year. The following tables are estimates for next year's sales. WHOLESALE SALES Number Sold Probability 2,000 0.1 5,000 0.3 10,000 0.4 20,000 0.2 Number Sold Probability RETAIL SALES 600 0.4 1,000 0.5 1,500 0.1 What profit does XYZ Office Supplies Company expect to make for the next year if the profit from each calculator sold is $20 at wholesale and $30 at retail?

Answer 1

Answer

given,

WHOLESALE SALES

Number Sold    2,000            5,000             10,000         20,000

Probability           0.1                  0.3                  0.4                 0.2

RETAIL SALES

Number Sold    600                1,000              1,500        

Probability           0.4                 0.5                  0.1          

Wholesale Sold

= 2000 (0.10) + 5000 (0.3) + 10000 (0.4) + 20000 (0.2)

= 9700

Cost = 9700 x $20

        = $ 194,000

Retail Sale

= 600 (0.4) + 1000 (0.5) + 1500 (0.1)

= 890

Cost = 890 x $30

        = $ 26,700

Profit this year

    = $ 194,000 + $ 26,700

    = $ 220,700