Question

Monarch King Size Beds Ltd. is evaluating a new promotional campaign that could increase sales. Possible outcomes and probabilities of the outcomes are shown below.  

 

Possible Outcomes	Additional Sales in Units			Probabilities
Ineffective campaign		30			0.30
Normal response		110			0.50
Extremely effective		130			0.20

 

Compute the coefficient of variation. (Round the final answer to 2 decimal places.)

  

Coefficient of variation           

Answer 1

Expected value=Respective sales*Respective probability

=(0.3*30)+(0.5*110)+(0.2*130)=90

probability	Sales	probability*(Sales-Expected Sales)^2
0.3	30	0.3*(30-90)^2=1080
0.5	110	0.5*(110-90)^2=200
0.2	130	0.2*(130-90)^2=320
		Total=1600

Standard deviation=[Total probability*(Sales-Expected Sales)^2/Total probability]^(1/2)

=40

Coefficient of variation=Standard deviation/Expected value

=40/90

=0.444(Approx).