Three possible levels of demand for frames in coming year

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Reference no: EM132295052

LSMU makes picture frames for fine art. Each frame generates revenue of $100. LSMU has estimated three possible levels of demand for frames in the coming year: there is a 50% chance the demand will be 600; a 30% chance the demand will be 800, and a 20% chance the demand will be 1,500.

a) LSMU currently has a capacity of 900 frames per year that limits how many they can produce and sell. What is the expected value of the revenue for next year for LSMU?

b) What capacity (in frames per year) for LSMU would be needed to make the expected value of revenue for next year be $80,000 forMU?

Reference no: EM132295052

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