Yorkies Company has fixed costs of $80,000 per month. Variable costs are $12 per item produced. The selling price per unit is fixed at $20. From the past company data, you have determined that Yorkies Companys

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Yorkies Company has fixed costs of $80,000 per month.   Variable costs are $12 per item produced.   The selling price per unit is fixed at $20.   From the past company data, you have determined that Yorkies Companys

Steacensen69 · Accepted Answer

Step 1  A distribution which has curve with bell shape is called normal distribution. This curve is symmetric about the mean of the distribution. The normal random variable x can be converted into standard score using z=x−μσ   The probability that a continuous random variable lies within an interval is equal to the area under the distribution within the interval. The probability can be represented in percentage form by multiplying it with 100.   Step 2   Let the number of items or output per month is x, then the profit will be equal to selling price minus the production price. The selling price for 1 item is 20, so the total selling price is 20x and the cost price is 12 per item thus the price of making x items will be 12x. There is a monthly fixed price of 80000 which will be added to the production price.  Profit=Selling price−Production price  =20x−(12x+80000)  =8x−80000  There will be loss if profit is less than 0. Substitute 0 for profit and compute the number of items x.  Profit&amp;lt;0  8x−80000&amp;lt;0  8x&amp;lt;80000  x&amp;lt;800008  x&amp;lt;10000  Step 3   So there will be loss if output is less than 10000. The output is normally distributed with μ=11100 and σ2=550000. Convert x=10000 into z-score by substituting μ=11100 and σ=550000 ∈ z=x−μσ.  z=10000−11100550000  =−1100741.62  ≈−1.48  Using the table of standard normal distribution the area on the left of z=−1.48 is 0.0694. So the probability that output is less than 10000 and the company make loss is 0.0694.   To write it is percentage form multiply it with 100.  0.0694⋅100=6.94%  ≈7%  So there is 7% chance of loss and option (d) is correct.   Note: The value in (d) and (e) is same.

Yorkies Company has fixed costs of $80,000 per month. Variable co

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