Dinapama Manufacturing and Supplies is a 100% Namibian garment manufacturer. They are masters
of custom designed clothing and bag manufacturing of all shapes and sizes. They were officially
registered in 2009 and operations started in 2010 with a workforce of 7 people and 5 machines at
Wanahenda Municipal stalls and thereafter their workforce increased to over 20 employees. As
business grew bigger, they sought for larger premises and they now house over 356 employees and
874 machines and are currently situated in Windhoek in the Northern Industrial Area.
Dinapama Manufacturing and Supplies is also a manufacturer of winter coats. Because of global
warming they are uncertain if they should continue with the manufacturing of their normal range of
heavy winter coats or if they should switch to a lighter type of jacket. The following probabilities were
given to them by researchers in weather patterns for this coming winter:

They have estimated that if it is a mild winter their expected return on their normal coats will be 5%; if it is a normal winter 20% and if it is a cold winter 35%. Their expected return, if they were to decide to manufacture the lighter type of jacket is 40% in a mild winter, 15% and in a cold winter and -5% in an extra cold winter.

Required:

1. Calculate the variance for the normal coats as well as the lighter jackets.                                  (8)
2. Calculate the standard deviation for normal coats and the lighter jackets.                                (4)
3. Comment on the risk of the two options and recommend an option if the company is ris