Profit Probability Estimation. Intimate Lighting, Inc., is a rapidly growing lighting accessory outlets that caters to the do-it-yourself home remodeling market. During the past year, 18 stores were operated in small to medium-size metropolitan markets. An in-house study of sales by these outlets revealed the following (standard errors in parentheses):
Standard Error of the Estimate = 500.
Here, Q is unit sales, P is unit price, P_X is the average unit price at competitor stores, A is advertising expenditures, and I is income per capita.
A. Tucson, Arizona was a typical market covered by this analysis. In the Tucson market, "own" price was $60, competitor price was $45, advertising was $13,500, and income was an average $80,000. Calculate and interpret the expected level of unit sales, as well as the 95% and 99% confidence regions for actual sales.
B. Calculate the 95% and 99% confidence regions for actual revenues in the Tucson market.
C. Estimate the probability that the Tucson store made a profit during this period if total costs were $1,735,200.

Question

Profit Probability Estimation. Intimate Lighting, Inc., is a rapidly growing lighting accessory outlets that caters to the do-it-yourself home remodeling market. During the past year, 18 stores were operated in small to medium-size metropolitan markets. An in-house study of sales by these outlets revealed the following (standard errors in parentheses):

Standard Error of the Estimate = 500.
Here, Q is unit sales, P is unit price, P_X is the average unit price at competitor stores, A is advertising expenditures, and I is income per capita.
A. Tucson, Arizona was a typical market covered by this analysis. In the Tucson market, "own" price was $60, competitor price was $45, advertising was $13,500, and income was an average $80,000. Calculate and interpret the expected level of unit sales, as well as the 95% and 99% confidence regions for actual sales.
B. Calculate the 95% and 99% confidence regions for actual revenues in the Tucson market.
C. Estimate the probability that the Tucson store made a profit during this period if total costs were $1,735,200.

Quizplus · Accepted Answer

The Answer of Profit Probability Estimation. Intimate Lighting, Inc., is a rapidly growing lighting accessory outlets that caters to the do-it-yourself home remodeling market. During the past year, 18 stores were operated in small to medium-size metropolitan markets. An in-house study of sales by these outlets revealed the following (standard errors in parentheses): Standard Error of the Estimate = 500. Here, Q is unit sales, P is unit price, P_X is the average unit price at competitor stores, A is advertising expenditures, and I is income per capita. A. Tucson, Arizona was a typical market covered by this analysis. In the Tucson market, "own" price was $60, competitor price was $45, advertising was $13,500, and income was an average $80,000. Calculate and interpret the expected level of unit sales, as well as the 95% and 99% confidence regions for actual sales. B. Calculate the 95% and 99% confidence regions for actual revenues in the Tucson market. C. Estimate the probability that the Tucson store made a profit during this period if total costs were $1,735,200.