A cereal manufacturer makes 60 percent of its sales to supermarkets, 10 percent to convenience stores, and 30 percent to warehouse clubs. Next year, supermarket sales are expected to go up 2 percent; convenience store sales, 1 percent; and warehouse clubs sales, 6 percent. Overall, the dairy farm's sales will rise by 3.0 percent.

Question

Quizplus · Accepted Answer

The overall sales increase can be calculated by taking the weighted average of the increases based on the initial sales distribution. This would be (0.60 * 0.02) + (0.10 * 0.01) + (0.30 * 0.06) = 0.012 + 0.001 + 0.018 = 0.031 or 3.1 percent, not 3.0 percent.

A Cereal Manufacturer Makes 60 Percent of Its Sales to Supermarkets