Your company isconsidering two products for a new market. The probabilitydistribution for the demand for the two products is presented inthe table below. Q(A) and Q(B) are the possible quantities of eachproduct that could be sold. P(A) and P(B) are the probabilities ofselling the corresponding quantities.
Q(A) | P(A) | Q(B) | P(B) |
10000 | 0.15 | 10000 | 0.25 |
30000 | 0.20 | 30000 | 0.30 |
50000 | 0.40 | 50000 | 0.35 |
60000 | 0.25 | 60000 | 0.15 |
You have the followingadditional information: The projected selling price for DESIGN "A"is $60. The fixed cost of its production is$75,000. Its variablecost is $35 a unit. The selling price for DESIGN "B" is $80. Itsfixed cost of production is $110,000. Variable cost of productionis $48 a unit.
Which project isexpected to be more profitable?
