Question

A doughnut shop has purchased a liability policy for its doughnut making machines from the same insurance company for the past five years. The number of service calls by the company as the result of machine malfunctions is shown below: Year Service Calls 2010 2009 2008 2007 2006 Calculate the variance of the empirical distribution of the number of service calls per year.
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Answer #1

Since the number of service calls is very less a year and this being a discrete random variable, the empirical distribution ofthe number of service calls seems to be Poisson Distribution.

An estimate of variance can be obtained from the given data using the formula

mean) /n

Hence the variance obtained here is 5.84

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