a service that repairs TV sells maintenance agreement for $10 a year the average cost for repairing a TV is $38 and 3 in every 100 people who purchased maintenance agreements have TV's that require repair. find the services expected profits per maintenance agreement.
Well, let's crunch some numbers and make it fun!
To find the expected profits per maintenance agreement, we need to consider the probability of someone purchasing a maintenance agreement and requiring a TV repair.
The probability of someone purchasing the maintenance agreement is given as 3 in every 100 people, so that's 3/100 or 0.03.
The cost of repairing a TV, on average, is $38. Since the maintenance agreement costs $10 per year, the profit per agreement will be $38 - $10 = $28.
To calculate the expected profits, we multiply the probability of someone purchasing the agreement by the profit per agreement:
Expected profits per maintenance agreement = 0.03 (probability) * $28 (profit) = $0.84.
So, the service's expected profits per maintenance agreement would be around $0.84. Keep in mind, though, that these numbers are just an estimate and might vary in reality.
Hope that made you chuckle while answering your question!
To find the service's expected profits per maintenance agreement, we need to calculate the revenue and the cost associated with each maintenance agreement.
First, let's calculate the revenue:
The service charges $10 per year for a maintenance agreement, so the revenue from each agreement is $10.
Next, let's calculate the cost:
Given that 3 in every 100 people who purchased maintenance agreements require TV repair, we can say that the cost per maintenance agreement would be the average cost for repairing a TV, which is $38, multiplied by the probability of a repair happening (3/100). So the cost per agreement is (3/100) * $38.
Now, we can calculate the service's expected profit per maintenance agreement:
Expected Profit = Revenue - Cost
Expected Profit = $10 - ((3/100) * $38)
Expected Profit = $10 - ($1.14)
Expected Profit ≈ $8.86
Therefore, the service's expected profit per maintenance agreement is approximately $8.86.