ExpertMedium2 marksShort Answer
ACCA · Question 10 · Data analysis and statistical techniques
Section A
HopeFoundation, an NGO, is planning a fundraising campaign. The management accountant has estimated the following probabilities for the net funds raised:
- 30% probability of raising $50,000
- 50% probability of raising $30,000
- 20% probability of raising $10,000
Calculate the Expected Value (EV) of the funds raised.
(Enter your answer as a whole number without the dollar sign or commas)
Section A
HopeFoundation, an NGO, is planning a fundraising campaign. The management accountant has estimated the following probabilities for the net funds raised:
- 30% probability of raising $50,000
- 50% probability of raising $30,000
- 20% probability of raising $10,000
Calculate the Expected Value (EV) of the funds raised.
(Enter your answer as a whole number without the dollar sign or commas)
How to approach this question
Multiply each outcome by its probability and sum the results: (0.30 * 50,000) + (0.50 * 30,000) + (0.20 * 10,000).
Full Answer
Expected Value = (0.30 × $50,000) + (0.50 × $30,000) + (0.20 × $10,000)
EV = $15,000 + $15,000 + $2,000 = $32,000.
Common mistakes
Simply averaging the three outcomes ($50k+$30k+$10k)/3 = $30k, ignoring the probabilities.
Practice the full ACCA MA — Management Accounting Practice Exam 6
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