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1-14. f = 350 s = 15 v = 8 a) Total revenue = 20(15) = $300

1-14. f = 350 s = 15 v = 8 a) Total revenue = 20(15) = $300 Total variable cost = 20(8) = $160 b) BEP = f /( s - v ) = 350/(15 - 8) = 50 units Total revenue = 50(15) = $750. 1-15. f = 150 s = 50 v = 20 BEP = f /( s - v ) = 150/(50 - 20) = 5 units.

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1-14. f = 350 s = 15 v = 8 a) Total revenue = 20(15) = $300

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  1. 1-14.f = 350 s = 15 v = 8 a) Total revenue = 20(15) = $300 Total variable cost = 20(8) = $160 b) BEP = f/(s - v) = 350/(15 - 8) = 50 units Total revenue = 50(15) = $750 1-15.f = 150 s = 50 v = 20 BEP = f/(s - v) = 150/(50 - 20) = 5 units 1-17.f = 400 + 1,000 = 1,400 s = 5 v = 3 BEP = f/(s - v) = 1400/(5 - 3) = 700 units 1-18. BEP = f/(s - v) 500 = 1400/(s - 3) 500(s - 3) = 1400 s - 3 = 1400/500 s = 2.8 + 3 s = $5.80

  2. 1-19.f = 2400 s = 40 v = 25 BEP = f/(s – v) = 2400/(40 – 25) = 160 per week Total revenue = 40(160) = $6400 1-20.f = 2400 s = 50 v = 25 BEP = f/(s – v) = 2400/(50 – 25) = 96 per week Total revenue = 50(96) = $4800 1-21.f = 2400 s = ? v = 25 BEP = f/(s – v) 120 = 2400/(s – 25) 120(s – 25) = 2400 s = 45 1-22.f = 11000 s = 250 v = 60 BEP = f/(s – v) = 11000/(250 – 60) = 57.9 1-23.  a)  f = 300 + 75 = 375 s = 20 v = 5 BEP = f/(s – v) = 375/(20 – 5) = 25 b)  f = 200 + 75 = 275 s = 20 v = 5 BEP = f/(s - v) = 275/(20 - 5) = 18.333

  3. 2-32.  This is a binomial distribution with n = 10, p = 0.5, q = 0.5 a)  b)  c)  d)  e) P(r  6) = P(r  7) = P(r = 7) + P(r = 8) + P(r = 9) + P(r = 10) = 0.1172 + 0.0439 + 0.0098 + 0.0010 = 0.1719 2-33.  This is a binomial distribution with n=4, p=0.7, and q=0.3.

  4. 2-34.  This is a binomial distribution with n =5, p=0.1, and q=0.9. 2-35.  This is a binomial distribution with n=6, p=0.05, and q=0.95. 2-36.  This is a binomial distribution with n=6, p=0.15, and q=0.85. • Probability of 0 or 1 defective = P(0) + P(1) = 0.377 + 0.399 = 0.776.

  5. 2-37.= 450 degrees = 25 degrees X= 475 degrees

  6. The area to the left of 475 is 0.8413 from Table 2.9, where  = 1. The area to the right of 475 is 1 – 0.84134 = 0.15866. Thus, the probability of the oven getting hotter than 475 is 0.1587. To determine the probability of the oven temperature being between 460 and 470, we need to compute two areas.

  7. X1 = 460 X2 = 470 Z1 = area X1 = 0.65542 Z2 = area X2 = 0.78814 The area between X1 and X2 is 0.78814 – 0.65542 = 0.13272. Thus, the probability of being between 460 and 470 degrees is = 0.1327.

  8. 2-38. = 4,700;  = 500 Z = = = 1.6 The area under the curve lying to the left of 1.6 = 0.94520. Therefore, the area to the right of 1.6 = 1 – 0.94520, or 0.0548. Therefore, the probability of sales being greater than 5,500 oranges is 0.0548.

  9. b. area = 0.65542 probability = 0.65542

  10. c. Z= Area = 0.65542 = probability This answer is the same as the answer to part (b) because the normal curve is symmetrical.

  11. d. Z= Area to the right of 4,300 is 0.7881, from Table 2.9. The area to the left of 4,300 is 1 – 0.78814 = 0.21186 = the probability that sales will be fewer than 4,300 oranges.

  12. 3-17.  a.  Decision making under uncertainty. b.  Maximax criterion. c.  Sub 100 because the maximum payoff for this is $300,000. 3-18.  Using the maximin criterion, the best alternative is the Texan (see table above) because the worst payoff for this ($–18,000) is better than the worst payoffs for the other decisions

  13. 3-19.  a.  Decision making under risk—maximize expected monetary value. b.  EMV (Sub 100) = 0.7(300,000) + 0.3(–200,000) = 150,000 EMV (Oiler J) = 0.7(250,000) + 0.3(–100,000) = 145,000 EMV (Texan) = 0.7(75,000) + 0.3(–18,000) = 47,100 Optimal decision: Sub 100. c.  Ken would change decision if EMV(Sub 100) is less than the next best EMV, which is $145,000. Let X = payoff for Sub 100 in favorable market.    (0.7)(X) + (0.3)(–200,000)  145,000 0.7X  145,000 + 60,000 = 205,000 X  (205,000)/0.7 = 292,857.14 The decision would change if this payoff were less than 292,857.14, so it would have to decrease by about $7,143.

  14. 3-20.  a.  The expected value (EV) is computed for each alternative. EV(stock market) = 0.5(80,000) + 0.5(–20,000) = 30,000 EV(Bonds) = 0.5(30,000) + 0.5(20,000) = 25,000 EV(CDs) = 0.5(23,000) + 0.5(23,000) = 23,000 Therefore, he should invest in the stock market. b.  EVPI = EV(with perfect information) – (Maximum EV without P, I) = [0.5(80,000) + 0.5(23,000)] – 30,000 = 51,500 – 30,000 = 21,500 Thus, the most that should be paid is $21,500

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