Question

16.

Myers Business Systems is evaluating the introduction of a new product. The possible levels of unit sales and the probabilities of their occurrence are given next:
  

Shack Homebuilders Limited is evaluating a new promotional campaign that could increase home sales. Possible outcomes and probabilities of the outcomes are shown next.      
  

Possible Outcomes	Additional Sales in Units			Probabilities
Ineffective campaign		60			.40
Normal response		80			.30
Extremely effective		140			.30

     
Compute the coefficient of variation. (Do not round intermediate calculations. Round your answer to 3 decimal places.)

a. What is the expected value of unit sales for the new product? (Do not round intermediate calculations and round your answer to the nearest whole unit.)
  

s.)

Answer 1

Step-1, Calculation of the Expected unit sales

Expected unit sales = Sum(Number of units x Probability)

= (60 Units x 0.40) + (80 Units x 0.30) + (140 Units x 0.30)

= 24 Units + 24 Units + 42 Units

= 90 Units

Step-2, Calculation of the Standard deviation of unit sales

Firstly, Calculate the Variance of the units

Variance = [(60 – 90)² x 0.40] + [(80 - 90)² x 0.30] +[(140 – 90)² x 0.30]

= [900 x 0.40] + [100 x 0.30] + [2,500 x 0.30]

= 360 + 30 + 750

= 1,140 Units

Standard Deviation = (1,140)^1/2 or the Square Roof of 1,140

= 33.76 units

Step-3, Calculation of the Coefficient of Variation

Coefficient of Variation = Standard deviation of unit sales / Expected unit sales

= 33.76 units / 90 Units

= 0.375

“Therefore, the Coefficient of Variation would be 0.375”