Linuqa Manufacturing and Supplies is a 100% Namibian garment manufacturer. They are masters of custom designed clothing and bag manufacturing of all shapes and sizes. They were officially registered in 2009 and operations started in 2010 with a workforce of 7 people and 5 machines at Wanahenda Municipal stalls and thereafter their workforce increased to over 20 employees. As business grew bigger, they sought for larger premises and they now house over 356 employees and 874 machines and are currently situated in Windhoek in the Northern Industrial Area. Linuqa Manufacturing and Supplies is also a manufacturer of winter coats. Because of global warming they are uncertain if they should continue with the manufacturing of their normal range of heavy winter coats or if they should switch to a lighter type of jacket. The following probabilities were given to them by researchers in weather patterns for this coming winter.

Type of winter	Probability
Mild	40
Normal	50
Extra cold	10

They have estimated that if it is a mild winter their expected return on their normal coats will be 5%; if it is a normal winter 20% and if it is a cold winter 35%. Their expected return, if they were to decide to manufacture the lighter type of jacket is 40% in a mild winter, 15% and in a cold winter and -5% in an extra cold winter.

Required:

1. Calculate the variance for the normal coats as well as the lighter jackets.
2. Calculate the standard deviation for normal coats and the lighter jackets.
3. Comment on the risk of the two options and recommend an option if the company is risk averse.

Answer rating: 100% (QA)

Winter CoatsX jacketsY ProbabilityP XP YP DxX017 DyY023 Dx 2 Dy 2 Dx 2 P Dy 2 P Mild 005 04 04 0... View the full answer