Probability analysis

In this lesson

1. 0:00 Probability analysis introduction
2. 1:05 Expected value concept and formula
3. 2:21 Payoff table overview and purpose
4. 3:00 Building a payoff table worked example
5. 5:00 Handling demand lower than supply
6. 6:02 Completing and interpreting payoff tables

About this lesson

You'll discover how to calculate expected values, construct payoff tables that map different supply and demand scenarios, and understand how to work through complex profit calculations when outcomes are unknown. This is essential for ACCA PM, where probability and decision-making under risk form a core part of the syllabus and frequently appear in exam questions. The session starts by recapping probability fundamentals: how probabilities range from 0 to 100%, must sum to one across all outcomes, and how to calculate expected value by multiplying each possible outcome by its probability. You'll then work through a practical cake shop example that demonstrates how to build a payoff table systematically. The example shows you how to calculate profit or loss across different combinations of supply and demand levels, accounting for both the contribution earned on sold items and the cost of unsold stock. By the end, you'll have a clear framework for structuring these tables with supply as columns (your decision) and demand as rows (the unknown), ready to apply different risk evaluation techniques.

Duration: 7m