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Question - LSMU makes decorative flower pots. Each flower pot sells for a revenue of $10. LSMU has estimated three possible levels of demand for flower pots in the coming year: there is a 30% chance the demand will be 2000; a 50% chance the demand will be 3000, and a 20% chance the demand will be 4000.
a) LSMU currently has a capacity of 2500 flower pots 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) LSMU wants to increase their capacity so they can produce more and increase their revenue. What capacity (in flower pots per year) would be needed to make the expected value of revenue for next year be $32,000 for LSMU?
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