Determining standard deviation in average revenue

Reference no: EM1315637

Q1) Young entrepreneur holds bake sale outside of his house every Saturday. He sells glasses of fresh squeezed lemonade for= $0.75 and brownies for= $1.25. He has been doing this for about a year and has reserved careful records of his sales. Number of glasses of lemonade he sells averages out to 25 and has standard deviation of= 5. Number of brownies he sells averages out to 18 and has standard deviation of= 6.

i) Determine his average revenue.

ii) Suppose that sales of lemonade and sales of brownies are independent, determine standard deviation in his revenue.

Q2) Assume you are merchandise manager for Tiffany's Diamonds (an enviable position). Analyze profit margin of your diamonds based upon sample of recently-sold diamonds. If the average profit margin for the diamonds is in the lowest 5% of expected averages, you plan to counsel entering higher profit markets such as high-end watches. You gather cost and sales data for 190 diamonds and determine mean profit margin for this sample is 23%. Historically, mean profit margin has been 25% with standard deviation of 14%.

i) Where does your sample mean profit margin lie in relation to distribution of sample mean profit margins for samples of 190 diamonds?

ii) Based on your answer to part a, determine your recommendation regarding entering high-end watch market?

Reference no: EM1315637

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