- A bakery knows that on average 1 out of every 8 loaves of bread baked will not be sold while still fresh.
a. If the bakery produces 1,075 loaves of bread each week, how many loaves are expected to not sell while still fresh?
b. Each loaf sells for $3.50 when fresh. Loaves that do not sell fresh are sold at a discount, fetching an average price
of $1.00 per loaf. What is the average cost per loaf for spoilage?E. Grab Bag
- If you are considering moving to a new town and buying a house, which average would give you the better sense of
what housing prices are like there: the mean or the median? Why? - Suppose that Wally’s Widget World has 450 widgets in stock. Fifty of them were purchased at a discounted cost of $2.00
each, while the remaining 400 were purchased for $8.00 each. Calculate the average cost per widget for the widgets. - An electronics company offers a large-screen television for sale at $899, less a $300 mail-in rebate. Based on past
experience, the company expects that only 62% of the people who buy this TV will actually submit the claim for the
rebate. What is the expected cost to the company for the rebate for each TV sold? What is the company’s actual
expected income per television sold? - (Continued from Exercise 20). Explain why a company might prefer to offer a rebate rather than just offering their
product for sale at a lower price.
F. Additional Exercise
- Speedywheels Bicycles estimates that 40% of the cost of each of its bicycles comes from manufacturing costs, 25% from
raw materials, and 35% from other overhead. The company’s budget for next year projects that manufacturing costs
will rise by 5.3%, raw material costs will rise by 8.5%, and other overhead costs will drop by 1.3%. If these projections
are correct, by what percent will the cost of a Speedywheels bicycle rise next year.
626 Chapter 16 Business Statistics
16.3 Measures of Variation
Measures of average are very important for a business trying to make appropriate
management decisions based on statistical data. Averages, though, can’t tell the whole
story. It is often important not just to measure the average of some amount, but also to
measure just how widely the values vary.
Suppose, for example, that you are working for an electric company evaluating differ-
ent possible locations for a wind turbine. You are considering two different possible sites
for the turbine. The wind will generate the electricity, but the wind does not blow with the
same strength in different locations, and so you decide to do some testing of the two sites.
Of course, the wind does not always blow with the same strength at different times, either.
At each of the two sites, you measure the wind speed in miles per hour (mph) at five differ-
ent times^5 and obtain the following results (listed from slowest to fastest at each location):(^5) In reality, you would want far more than just fi ve measurements to base your decision on. In this discussion we are
just using fi ve measurements in order to demonstrate how statistical measures could be used in this sort of situation,
while keeping the work of calculating the measures manageable. If we had several thousand measurements at each
location, the calculations would obviously require much more effort, but they would be done in the same way.