Carpet a Store Selling Carpet Tracks the Amount of Square

question 230

Essay

Carpet A store selling carpet tracks the amount of square footage sold to its customers,
rounding to the nearest 500 sq. ft. Here is the distribution. $$\begin{array} { | l | l | l | l | l | } \hline \text { area } & 500 \text { sq. ft. } & 1000 \text { sq. ft. } & 1500 \text { sq. ft. } & 2000 + \text { sq. ft. } \\\hline \text { probability } & 0.10 & 0.25 & 0.45 & 0.20 \\\hline\end{array}$$
a. What is the average expected area sold?
b. If the average cost of carpet sold is $3/sq. ft., what is the average sale price per customer?
c. If a salesman completes sales to five customers one day, what do you expect his total
sales to be?

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Definitions:

Differential Revenue

The difference in revenue generated under two different scenarios or as a result of a specific action.

Additional Cost

Expenses incurred that are over and above the originally planned or estimated costs.

Selling Price

The amount at which a product or service is offered to customers for purchase.

Opportunity Cost

The benefit that is missed or given up when choosing one alternative over another.