BUS 341 Exercise#4

4/3/2019

1. A fair coin (i.e. heads and tails are equally likely) is tossed 5 times. Let X be the number of heads observed in
5 tosses of this fair coin. Use a 1000-trial simulation to report the expected value of X and its sample standard
deviation.

Answer: Mean ≈ 2.5; Standard deviation ≈ 1.15.

2. Suppose it is known that the distribution of purchase amounts by customers entering a popular retail store is
approximately normal with mean $75 and standard deviation $20.

(a) What is the probability that a randomly selected customer spends less than $85 at this store?

Answer: 0.6941.
(b) What is the probability that a randomly selected customer spends between $65 and $85 at this store?

Answer: 0.38292.
(c) What is the probability that a randomly selected customer spends more than $45 at this store?

Answer: 0.93319.
(d) Find the dollar amount such that 75% of all customers spend no more than this amount.

Answer: $88.49.
(e) Find the dollar amount such that 80% of all customers spend at least this amount.

Answer: $58.17.
(f) Find two dollar amounts, equidistant from the mean, such that 90% of all customer purchases are between
these values.

Answer: ($42.10, $107.90)

3. Ramen No.1 prepares bowls of ramen (broth, noodles, and meat all included) for sale every morning. It costs the
restaurant $3.50 per bowl and each is sold for $7. At the end of the day, leftover bowls are carried to the nearby
homeless shelter and sold for $0.50 per bowl. The daily demand for the ramen at Ramen No. 1 is known to be
normally distributed with mean 300 bowls and standard deviation 50. You are running Ramen No.1 and trying to
determine how many bowls to make each morning to maximize the restaurant’s profit. Use simulation to find a very
good, if not optimal, production plan.

Specifically, do 1000 trials for each possible number of bowl production and complete the following table. Select
from the table your optimal production.

1
 Production (Bowls) Average Profit ($)
260
270
280
290
300
310
320
330
340
350

Answer:

Average profits are only approximate values.

Production (Bowls) Average Profit ($)

260 870
270 892
280 900
290 909
300 919
310 925
320 908
330 898
340 904
350 865

310 (bowls) is the best production level.

4. The lifetime of a certain manufacturer’s washing machine is normally distributed with mean 4 years. Only 15% of
all these washing machines last at least 5 years. What is the standard deviation of the lifetime of a washing machine
made by this manufacturer?
Answer: 0.965 years.