Alice: 4 sales meetings per day, 3% probabily of converting a sale. Each sale br

Question

Alice: 4 sales meetings per day, 3% probabily of converting a sale. Each sale brings in $50,000 and she works 20 days per month. Her monthly operating costs are $40,000.

Bob: sales are normaly distribute, with mean of $3,500 and standard deviation of $1,750. He works 25 days a month

Suppose that Alice and Bob from the previous two questions are business partners who pool their sales and share expenses. (a) Calculate the mean and standard deviation of their combined monthly sales. (b) In light of your answers in the previous question, describe why Alice might want to share profit and expenses with Bob. Why might Bob want to do the same with Alice

Explanation / Answer

Ans: For Alice:

Number of metting in a month=4*20=80

Number of meeting converting to sale=80*0.03=2.4

Each sale get him =50000

Total revenue in a month=2.4*50000=120000

Profit after deducting operating cost=120000-40000=80000

Average profit per day=80000/20=4000

For Bob:

Now,his sales are normally distributed with mean 3500 and standard deviation 1750 and works for 25 days.

As,Bob's daily profit is 3500,which is less than alice's daily profit/sales and also standard deviation is very large.So Bob would like to share the profit and expenses with alice to get smooth daily profit from business.

But,Bob's sales is normally distributed which means he get on some days very high profit and on some days lower than 3500,so alice would like to share his high profit on some days,as in alice's business there is very low probability to convert a meeting to sales.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.