Lowe Tech Co. is evaluating the introduction of a new product. The possible leve

Question

Lowe Tech Co. is evaluating the introduction of a new product. The possible levels of unit sales and the probabilities of their occurrence are given.

Possible Market Reaction_________Sales in Units_____________Probabilities

Low Response_____________________30______________________.30

Moderate Response_________________45______________________.20

High Response_____________________55______________________.20

Very high response_________________70_______________________.30

a. What is the expected value of unit sales for the new product?

b . What is the standard deviation of unit sales?

Explanation / Answer

a. expected value of unit sales = 30*.3 + 45*.2 + 55*.2 + 70*.3 =50 units

b. standard deviation of unit sales = sqrt((30-50)^2*.3 + (45-50)^2*.2 + (55-50)^2*.2 + (70-50)^2*.3) =15.81

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