A bicycle shop plans to offer 2 specially priced children’s models at a sidewalk sale. The basic model will return a profit of $120 and the deluxe model $150. Past experience indicates that sales of the basic model will have a mean of 5.4 bikes with a standard deviation of 1.2, and sales of the deluxe model will have a mean of 3.2 bikes with a standard deviation of 0.8 bikes. The cost of setting up for the sidewalk sale is $200.
a) Define random variables and use them to express the bicycle shop’s net profit.
b) What’s the mean of the net profit?
c) What’s the standard deviation of the net profit?
d) Do you need to make any assumptions in calculating the mean? How about the standard deviation?