Problem 6-2 Expected value [LO6] 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?
Input variables:
Strong sales	$1,550,000
Steady sales	$825,000
Weak sales	$550,000
Strong probability	0.30
Steady probability	0.40
Weak probability	0.30
Solution and Explanation:
Expected outcome:
Strong sales
Steady sales
Weak sales
Total