1. Although studies continue to show leads to significant health probllems.

20% of adults in the

United States smoke. Consider a group of 250 adults.
a. What is the expected number of adults who smoke?
b. What is the probability that fewer than 40 smoke?
c. What is the probability that from 55 to 60 smoke?
d. What is the probability that 70 or more smoke?
2. A CBS News/ New York Times found that 97% of American believe that texting while driving
should be outlawed (CBS News website, January 5, 2015).
a. For a sample of 10 Americans , what is the probability that 8 say that they believe
texting while driving should be outlawed?
b. For a sample of 100 Americans what is the probability that at least 95 say that they
believe texting while driving should be outlawed?
c. As the number of trials in a binomial distribution application becomes large, what is the
normal approximation of binomial distribution

PAY PACKAGE PRE AND POST MBA

Consider the following information about the graduates of the 20 top ranking MBA programs in United
States

Average
1994 Average Pay Average
MBA Pay Post- Number
Progra Pre-MBA MBA of Job
m Rank School (USD) (USD) Offers
1 Pennsylvania (wharton) 48240 89930 3.02
2 North Western (kellogg) 44000 84640 2.96
3 Chicago 42690 83210 2.92
4 Stanford 49610 100800 3.47
5 Harvard 53910 102630 3.6
6 Michigan 36050 67820 2.68
7 Indiana 34320 58520 2.45
8 Columbia 44470 100480 2.43
9 UCLA (Anderson) 44620 74010 2.74
10 MIT (Sloan) 41820 80500 3.25
11 Duke (Fuqua) 40960 70490 2.78
12 Virginia (Darden) 38530 74280 2.69
13 Dartmouth (Tuck) 45300 95410 2.4
14 Carnegie-Melon 38250 69890 2.69
15 Cornell (Johnson) 40740 71970 2.4
16 NYU (Stern) 38960 70660 2.12
17 Texas 36620 61890 2.58
18 UNC (Kenan-Flagler) 38690 69880 3.09
19 California (Haas) 43570 71970 2.34
20 Purdue (Krannert) 30600 54720 2.19
 (a) Compute the mean and standard deviation for average post MBA salaries
(b) Assume that post MBA salaries are normally distribute with mean and standard deviation as
calculated in (a). What is the probability that a randomly selected 1994 MBA graduate
a. Earns more than $100.000?
b. Earns less than $ 60,000?
c. Earns between $75000 and $95000?
(c) Compute the mean for the average numbers of job offers
(d) If job offers per MBA are Poisson distributed with a mean calculated in © find the probability
that a randomly selected graduate received
a. Fewer than two offers
b. Two or three offers
c. More than three job offers

Specialty Toys
Specialty Toys , Inc., sells a variety of new and innovative children’s toy. Management learned that pre-
holiday season is the best time to introduce a new toy, because many families use this time to look for
new ideas for December Holiday gifts. When specialty discovers a new toy with a good market potential,
it chosen an October market entry date.

In order to get toys in its stores by October, Specialty places one-time orders with manufacturers in June
and July of each year. Demand for children’s toys can be highly volatile. If a new toy catches on, a sense
of shortage in the market place often increases the demand to high levels and large profits can be
realized. However, new toys can also flop, leaving Specialty struck with high levels of inventory that
must be sold in reduced prices. The most important question the company faces is deciding how many
units of a new toy should be purchased to meet anticipated sakes demand. If too few are purchased,
sales will be lost, if too many purchased, profits will be reduced because of low prices realized in
clearance sales.

For the coming season, Specialty plans to introduce a new product called Weather Teddy. This version of
Taking Teddy bear is made by a Company in Taiwan. When a child presses Teddy’s hand , the bear
begins to talk. A built –in barometer selects one of the five responses that predict the weather
conditions. The responses range from “It looks to be a nice day! Have fun” to “I think it may rain today.
Don’t forget umbrella”. Tests with product show that , even though it is not a perfect weather predictor,
its prediction are surprisingly good. Several of Specialty’s managers claimed Teddy gave predictions of
the weather that were as good as many local television weather forecasters.

As with other products, Specialty faces the issue of how many Weather Teddy units to order for the
coming holiday season. Members of management team suggests order quantities of 15000, 18000,
24000 and 28000 units. The wide range of order quantities suggested indicates considerable
disagreement concerning the market potential. The product management team asks you for an analysis
of stock-out probabilities for various order quantities, an estimate of the profit potential and help make
an order quantity recommendation. Speciality expects to sell Weather Reddy for $ 24 based on a cost
of $16 per unit. If inventory remains after the holiday season, Specialty will sell surplus inventory at $ 5
per unit. After reviewing sales history of similar products, Specialty’s senior sales forecasters predicted
as expected demand of 20000 units with a 0.95 probability demand would be between 10000 and 30000
units.

Managerial Report
Prepare a managerial report that addresses the following issues and recommends an order quantity for
the Weather Teddy product.

1. Use the sales forecaster’s prediction to describe a normal probability distribution that can be
used to approximate the demand distribution. Sketch the distribution and show its mean and
standard deviation
2. Compute the probability of stock-out order quantities suggested by members of management
team.
3. Compute the projected profit for the order quantities suggested by the management team
under three scenarios in which sales = 10000, most likely case in which sales = 20000 and best
case in which sales = 30000 units.
4. One of the Specialty’s managers felt that the order quantity should have a 70% chance of
meeting demand and 30% chance of stock outs. What would be the order under this policy , and
what is the projected profit under three sales scenarios
5. Provide your own recommendation for an order quantity and note the associated profit
projections . Provide a rationale for your recommendation