Sharpe Knife Company expects sales next year to be $1,550,000 if the economy is strong, $825,000 if the economy is steady, and $550,000 if the economy is weak. Mr. Sharpe believes there is a 30 percent probability the economy will be strong, a 40 percent probability of a steady economy, and a 30 percent probability of a weak economy. What is the expected level of sales for the next year?
6.1. Solution:
Sharpe Knife Company
| State of Economy | Sales | Probability | Expected Outcome |
| Strong | $1,550,000 | x.xx | $465,000 |
| Steady | $xxx,xxx | 0.40 | $xxx, xxx |
| Weak | $xxx, xxx | $xxx, xxx | $xxx, xxx |
| Expected level of sales = | $xxx, xxx | ||
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