Suppose the owner of a local apple orchard has 4 half-bushels of apples to sell. He loads them on his truck, and drives his route, stopping at stores along the way attempting to sells the apples. Suppose: - Each half-bushel is sold for $40.

- It will cost $15 of gas to drive the route.

Historically, the orchard owner knows he will have a 40% chance of making no sales, a 30% chance of selling 1 half-bushel, a 10% chance of selling 2 half-bushels, and a 10% chance of selling 3 half-bushels.

(a) Calculate the orchard owner’s expected profit from driving the route.

(b) Calculate the standard deviation of the profit from driving the route.

a) The orchard owner's expected profit from driving the route is $33.

b) The standard deviation of the profit is $27.28

Step-by-step explanation:

a) Data and Calculations:

Apples to sell = 4 half-bushels

Price of each half-bushel sold = $40

Sales revenue = $160 ($40 *4)

Cost of driving the route = $15

Expected values:

Event                          Probability  Revenue       Profit         Expected  Profit

No Sales                        40%            $0         ($15) ($0 - $15)        ($6.00)

Selling 1 half-bushel      30%         $40         $25 ($40 - $15)         $7.50

Selling 2 half-bushels   10%          $80         $65 ($80 - $15)        $6.50

Selling 3 half-bushels   10%         $120       $105 ($120 - $15)     $10.50

Selling 4 half-bushels   10%         $160       $145 ($160 - $15)     $14.50

Total expected profit = $33

Event                          Expected  Profit  Mean        Squared

                                                                       Difference

No Sales                            ($6.00)        -39             1,521

Selling 1 half-bushel           $7.50         -25.5           650.25

Selling 2 half-bushels        $6.50         -26.5           702.25

Selling 3 half-bushels      $10.50         -22.50         506.25

Selling 4 half-bushels      $14.50         -18.50          342.25

Sum of squared differences                                     3,722

Mean of squared differences = 744.4 (3,722/5)

Standard deviation = square root of the mean

= 27.28

= $27.28