Discussion
Table given below gives the Estimated and Actual Sales Revenue and Cost Figures for three years.
| Sales Revenue | 2007 | 2008 | 2009 | Cost | 2007 | 2008 | 2009 |
|---|---|---|---|---|---|---|---|
| Estimated | 1281 | 1452 | 1228 | Estimated | 986 | 1051 | 1024 |
| Actual | 1326 | 1286 | 1452 | Actual | 988 | 1076 | 1068 |
Estimated Profit = Estimated Revenue - Estimated Cost
Actual Profit = Actual Revenue - Actual Cost
Company plans to use a different mechanism for forecasting of its maximum possible profit = Max (Estimate, Actual (Sales Revenue) - Min (Estimate, Actual (Cost)). What is the maximum possible profit derived this way?
Answer: C
The maximum possible profit is 428.
For each year, take the larger of the estimated and actual revenue and subtract the smaller of the estimated and actual cost.
\[ \begin{aligned} 2007 &: 1326 - 986 = 340 \\ 2008 &: 1452 - 1051 = 401 \\ 2009 &: 1452 - 1024 = 428 \end{aligned} \]
The largest of the three is 428, in 2009, where the actual revenue (1452) was the higher figure and the estimated cost (1024) the lower. 340 and 401 are the values for 2007 and 2008, which catch anyone who stops at the first or second year.
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