Your firm, the WarmUp Company, sells only two products
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Your firm, the WarmUp Company, sells only two products

PROBLEM 1: The WarmUp Company

Your firm, the WarmUp Company, sells only two products: winter hats and coffee mugs. (This is quite a limited portfolio of products!) In terms of revenue, you charge prices of $20 per hat and $10 per mug. However, you are uncertain how many hats and mugs you will sell this year. Let H denote the number of hats you will sell this year, and let M denote the number of mugs you will sell this year. Based on forecasts from your sales team, you believe that… 

E(H) = 22,000, Var(H) = 9,000,000,        E(M) = 8,000, Var(M) = 1,000,000

A. What is your expected total revenue for the year from these two products?

B. Assuming H and M are independent, what is the variance of your total revenue for the year?

Hint
ManagementA) The total of each stage's value multiplied by that stage's probability equals expected revenue. Your earned revenue is the black number in the upper left (the same as the 'Revenue' figure in your insights dashboard). It's what you've already made a profit on. Whole revenue refers to the total quantity of products and services sold. It is determined by multiplying the total volume of g...
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