The Wilhelms Cola Company plans to market a new pineapple-flavored cola
this summer. The decision is whether to package the cola in returnable
or in no-return bottles. Currently, the state legislature is considering
eliminating no-return bottles. Tybo Wilhelms, president of Wilhelms Cola
Company has discussed the problem with his state representative and
established the probability to be .70 that no-return bottles will be
eliminated. The following table shows the estimated monthly profits (in
thousands of dollars) if the pineapple cola is bottled in returnable
versus no-return bottles. Of course, if the law is passed and the
decision is to bottle the cola in no-return bottles, all profits would
be from out-of-state sales. Compute the expected profit for both
bottling decisions. Which decision do you recommend?
Alternative Law is passed S1 Law is not passed S2
Returnable bottle 80 40
No-return bottle 25 60
Statistics Homework Solutions
#8635
Probability and Expected Value
Find the expected profit in the given question.
The Wilhelms Cola Company plans to market a new pineapple-flavored cola this summer. The decision is whether to package the cola in returnable or in no-return bottles. Currently, the state legislature is considering eliminating no-return bottles. Tybo Wilhelms, president of Wilhelms Cola Company has discussed the problem with his state representative and established the probability to be .70 that no-return bottles will be eliminated. The following table shows the estimated monthly profits (in thousands of dollars) if the pineapple cola is bottled in returnable versus no-return bottles. Of course, if the law is passed and the decision is to bottle the cola in no-return bottles, all profits would be from out-of-state sales. Compute the expected profit for both bottling decisions. Which decision do you recommend?
Alternative Law is passed S1 Law is not passed S2
Returnable bottle 80 40
No-return bottle 25 60
This solution calculates the expected profit and which decision is more profitable.
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