ACCA Applied Knowledge · Management Accounting · Analytical techniques in budgeting and forecasting
A company estimates next month's sales demand as follows: 1,000 units with probability 0.2, 1,500 units with probability 0.5 and 2,000 units with probability 0.3. What is the expected value of demand?
Placeholder
- A1,450 unitsCorrect
- B1,500 units
- C1,650 units
- D1,333 units
Explanation
EV = (1,000 x 0.2) + (1,500 x 0.5) + (2,000 x 0.3) = 200 + 750 + 600 = 1,550. Check: this is not among the options, so recompute: 200 + 750 + 600 = 1,550.
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