Question

Spaceley’s Sprockets has just developed a new product. George Jetson, the Head of Product Development, feels that the product is a winner, but he also feels it would be an even better product if waited six more months for further development before launching. Unfortunately, Spaceley’s closest competitor, Cogsley Cogs, has a similar product in the development pipeline. George feels that if he launches the product now to get a head start on Cogsley, he has a 50% chance of achieving a high level of sales, a 30% chance of a medium level of sales, and a 20% chance of a low level of sales. If he waits, he has a 30% chance of a high level of sales, and a 70% chance of a medium level of sales, with no chance of a low level of sales. High sales represents 100,000 units, medium sales represents 65,000 units, and low sales represents 10,000 units. If his objective is to maximize his expected number of units sold, what should George do and how many units would he be expected to sell

Answer 1

George should wait for six more months for further development before launching.

Total units expected to be sold by this time is 75500 units

Step-by-step explanation:

when launched early

Spaceley has : 50% of high level sale, 30% chance of medium level sale

20% chance of low level sale

When launched late

Spaceley has : 30% of high level sale, 70% of medium level sale, o% of low level sale

while

High sales = 100000

Medium sale = 65000

low level sale = 10000

A) when launched early

50% * 100000 = 50000

30% * 65000 = 19500

20% * 10000 = 2000

Total sales = 71500 units

B) when launched after 6 months

30% * 100000 = 30000

70% * 65000 = 45500

Total sales = 75500 units

George should wait for six more months for further development before launching.

Total units expected to be sold by this time is 75500 units