John Owen Owns a Drugstore That Is Experiencing Significant Growth

question 26

Multiple Choice

John Owen owns a drugstore that is experiencing significant growth. Owen is trying to decide whether to expand its capacity, which currently is $200,000 in sales per quarter. Sales are seasonal. Forecasts of capacity requirements, expressed in sales per quarter for the next year, follow.

Owen is considering expanding capacity to the $250,000 level in sales per quarter. The before- tax profit margin from additional sales is 15 percent. How much would before- tax profits increase next year because of this expansion?

• A) less than $15,000
• B) more than $15,000 but less than $16,000
• C) more than $16,000 but less than $17,000
• D) more than $17,000

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Definitions:

Customer Arrivals

The frequency or rate at which customers arrive at a point of service or location.

Traffic Accidents

Unforeseen and unplanned events on the roadways that involve vehicles causing damage, injury, or death.

Poisson Distributed

A probability distribution that measures the probability of a given number of events happening in a fixed interval of time or space.

Standard Deviation

The statistic that quantifies the spread of a dataset or distribution, showing how extensively the data points diverge from the average value.