Question

Garys Pipe and Steel company expects sales next year to be $910,000 if the economy is strong, $655,000 if the economy is steady, and $376,000 if the economy is weak. Gary believes there is a 10 percent probability the economy will be strong, a 55 percent probability of a steady economy and a 35 percent probability of a weak economy. What is the expected level of sales for next year? Expected level of sales

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Answer #1

Expected sales=Respective sales*Respective probability

=(910,000*0.1)+(655,000*0.55)+(376000*0.35)

=$582,850.

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