Question 1

A cloud hosting provider is launching a new premium server tier. The marketing department has estimated the following probabilities for first-year profits:
- 30% probability of $120,000 profit
- 50% probability of $80,000 profit
- 20% probability of a $20,000 loss (negative profit)

Calculate the Expected Value (EV) of the first-year profit. (Enter number only, no commas or symbols)

Accepted Answer

Multiply each outcome by its probability and sum the results. Remember to treat the loss as a negative number.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Treating the $20,000 loss as a positive number, resulting in $80,000.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA MA — Management Accounting Practice Exam 1

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