Suppose that Acme Tires sells their high performance tires for $259 each and their all weather tires for $149 each. Further suppose that the cost of producing high performance tire is $202 and cost of producing an all weather tire is $112. Finally, suppose that if a tire does not last 40,000 miles, Acme tires will replace it free of charge to consumer; Acme will incur the cost of replacement, but will not receive any additional revenue.
(a) Compute the profit earned/loss incurred on; a high performance tire that exceeds 40,000 miles, a high performance tire that doesn't exceed 40,000 miles, an all weather tire that exceeds 40,000 miles, and an all weather tire that fails to last 40,000 miles.
(b) Determine the expected value (expected profit) of producing an all weather tire? Of producing a high performance tire?
(c) Determine the variance and standard deviation (of profit, NOT of tire life) for producing an all weather tire? Of producing a high performance tire?