Nature Ready a small shop in New York retails two types of umbrellas: Baby Rain

Question

Nature Ready a small shop in New York retails two types of umbrellas: Baby Rain and Adult Rain. They purchase both of the umbrellas from the same supplier for $11 per unit and sell them

both for $15 per unit. Because Nature Ready has operated for 10 years selling this merchandise, they know

the demands for both umbrellas are normally distributed with a mean of 300.

The demand for Baby Rain has a standard deviation of 40. The demand for Adult Rain has a

standard deviation of 70.

Based upon this information which umbrella would present the

greater forecasting challenge? Please show your work.

a) Adult Rain umbrella presents the greater forecasting challenge because its demand has a higher variation

while having the same mean.

b) Adult Rain presents the greater forecasting challenge because it has a smaller variation while

having the same mean.

c) Baby Rain presents the greater forecasting challenge because it has a higher variation while having

the same mean.

d) Baby Rain presents the greater forecasting challenge because it has a smaller variation while having

the same mean.

e) Both umbrellas present the same forecasting challenge because they have the same mean.

f) Cannot be determined from the information provided.

Explanation / Answer

Both umbrellas: mean = 300

SD for Baby Rain = 40

SD fo Adult Rain = 70.

Correct option:

e) Both umbrellas present the same forecasting challemge because they have same mean.

EXPLANATION:

Only mean measures the forecasting challenge.

Standard deviation only measures the spread around the mean.

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