A laptop company's annual sales depend on the market states and whether a brand ambassador is used for advertising. The market consists of three s...
Question
A laptop company's annual sales depend on the market states and whether a brand ambassador is used for advertising. The market consists of three states: State I, State II, and State III with probabilities 0.4, 0.4, and 0.3 respectively. The selling price per laptop is Rs. 40,000 and the cost price is Rs. 38,500. The targeted annual sales (in units) are given below:
| Market State | With Brand Ambassador | Without Brand Ambassador |
|---|---|---|
| State I | 10,000 | 8,000 |
| State II | 8,000 | 5,000 |
| State III | 5,000 | 3,000 |
If the company signs a contract with Mr. X for Rs. 24.5 lakh, the cost price of each laptop increases by Rs. 100 in all market states. Assuming the selling price remains unchanged, what is the total profit earned by the company after paying Mr. X?
Use the formula for expected profit:
where is the profit in each market state and is the probability of that state.