ScootAround Inc. owns a scooter service station in California, where the climate is warm year-round. Customers have often expressed the need, especially during summer, for a cold drink facility at the station. The Cody Beverage Company has offered to lease ScootAround a cold drink vending machine for $200 per month plus $0.20 per can of cold drinks. ScootAround would sell each can of cold drink for $0.85.

A regression equation estimated based on 30 observations gave the following prediction of sales of cans of cold drinks:

Sales units=0.90(number of customers) + 60 per month. The standard error of the estimate is 80.

Refer to the “Present value and t-distribution tables”

Required:

You must provide all the detailed supporting calculations.

a. Assuming that ScootAround expects 3,000 customers in June; what are the best estimates of number of cans of cold drinks sold, and income for the month of June?   

b. What range of income can ScootAround expect with 90% confidence in June?

c. What is the required number of customers ScootAround must have to be 90% confident to make a profit of $700 in the month of June?   

d. What is the probability that ScootAround would earn zero income in June?