Sampson Corp. is evaluating the introduction of a new product. The possible leve

Question

Sampson Corp. is evaluating the introduction of a new product. The possible levels of unit sales and the probabilities of their occurrence are shown next:
  

Possible
Market Reaction

a. What is the expected value of unit sales for the new product? (Do not round intermediate calculations and round your answer to the nearest whole unit.)
  

  
b. What is the standard deviation of unit sales? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
  

Possible
Market Reaction

Sales
in Units Probabilities Low response 80 .40 Moderate response 90 .10 High response 110 .30 Very high response 130 .20

Explanation / Answer

Expected value=Respective sales*Respective probability

=(0.4*80)+(0.1*90)+(0.3*110)+(0.2*130)=100 units

2.

Standard deviation=[Total probability*(Sales-Expected value)^2/Total Probability]^(1/2)

=19.49(Approx).

probability Sales probability*(Sales-Expected value)^2 0.4 80 0.4*(80-100)^2=160 0.1 90 0.1*(90-100)^2=10 0.3 110 0.3*(110-100)^2=30 0.2 130 0.2*(130-100)^2=180 Total=380

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