The owner of a rafting company must decide how many rafts to make available for

Question

The owner of a rafting company must decide how many rafts to make available for an upcoming trip on the Grand Canyon. Before the trip, the major expense is a $6000 non-refundable permit for each raft that she plans to take down the river. Each raft holds up to eight customers, and every customer that signs up for the trip will pay $1600 to the rafting company. In the past eight years, demand for the trip as been 10 customers twice, 15 customers five times, and 20 customers once. According to expected value, should the owner plan on 1, 2, or 3 rafts?

Explanation / Answer

Based on the expected value it can be deciphered that there would be 15 customers as the demand for the trip has been five tim s for 15 customers hence to accommodate 15 customers the owner needs to plan 2 rafts for the trip. Each raft will require $6000 for the permit hence the total expenses would be $12000 and the earnings will be $24000 because as each customer will be providing a sum of $1600 there are 15 customers in total amounting to $24000.

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