ScootAround Inc. owns a scooter service station in California, where the climate is warm year-...
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ScootAround Inc. owns a scooter service station in California, where the climate is warm year- round. Customers have often expressed the need, especially during summer, for a cold drink facility at the station. The Cody Beverage Company has offered to lease ScootAround a cold drink vending machine for $200 per month plus $0.20 per can of cold drinks. ScootAround would sell each can of cold drink for $0.85.
A regression equation estimated based on 30 observations gave the following prediction of sales of cans of cold drinks: Sales units=0.90(number of customers) + 60 per month. The standard error of the estimate is 80.
a. Assuming that ScootAround expects 3,000 customers in June; what are the best estimates of number of cans of cold drinks sold, and income for the month of June? (2 marks)
b. What range of income can ScootAround expect with 90% confidence in June? (4 marks)
c. What is the required number of customers ScootAround must have to be 90% confident to make a profit of $700 in the month of June? (4 marks)
d. What is the probability that ScootAround would earn zero income in June?
Required to use Present value and t-distribution tables
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