Chapter 8.5, Problem 34E

Rating Sales Accounts Levi Strauss and Company uses expected value to help its salespeople rate their accounts. For each account, a salesperson estimates potential additional volume and the probability of getting it. The product of these figures gives the expected value of the potential, which is added to the existing volume. The totals are then classified as A, B, or C, as follows: $40,000 or below, class C; from $40,000 up to and including $55,000, class B; above $55,000, class A. Complete the table on the next page for one salesperson. Source: James McDonald.

Account Number	Existing Volume	Potential Additional Volume	Probability of Getting It	Expected Value of Potential	Existing Volume + Expected Value of Potential	Class
1	515,000	$10,000	0.25	$2500	$17,500	C
2	$40,000	$0	—	—	$40,000	C
3	$20,000	$10,000	0.20
4	$50,000	$10,000	0.10
5	$5000	$50,000	0.50
6	$0	5100,000	0.60
7	$30,000	$20,000	0.80