This is quite a silly problem. No wonder statistics (for business) gets so little respect. This is time series or process data--not a random sample from some fixed population. There is no information about the stability of the process over time. Very few business processes are stable over five years. Why can't we teach meaningful statistics? Jon Cryer At 05:14 PM 12/13/00 +0100, you wrote: >I have some difficulties with following problem >(I need the solution urgently for tomorrow): > >Production levels for Giles Fashion vary greatly according to consumer >acceptance of the latest styles. Therefore, the company's >weekly orders of wool cloth are difficult >to predict in advance. On the basis of 5 years data, the following >probability distribution for the company's weekly demand for wool >has been computed: > >Amount of wool (lb) Probability >2500 0.30 >3500 0.45 >4500 0.20 >5500 0.05 > >>From these data, the raw-materials purchaser computed the >expected number of pounds required. Recently, she noticed >that the company's sales were lower in the last year than in years >before. >Extrapolating, she observed that the company will be lucky >if its weekly demand averages 2,500 this year. > >(a) What was the expected weekly demand for wool based >on the distribution from past data? > >(b) If each pound of wool generates $5 in revenue and costs $4 to >purchase, ship, and handle, how much would Giles Fashion stand >to gain or lose each week if it orders wool based on the past >expected value and company's demand is only 2,500? > >(End of the text of the problem.) > >Possible solution (in my opinion): > >I. >(a) I fink is obvious: If X means company's weekly demand for wool >(lb), then the expected weekly demand for wool based on the >distribution from past data =E(X) = >0.3*2500+0.45*3500+0.20*4500+0.05*5500= >= 3500. Am I right? > >(b) >Actually I am not sure what company's weekly demand for >wool in the past data (table of probability distr.) means. >It is the amount of wool which company bought weekly >or is the amount of wool which company sold (in it's products) >weekly? >The last sentence make difference between >company's orders (it orders wool based...) and company's demand >( and company's demand is only 2,500) >(I think but I am not sure, it's actually company's weekly demand for >wool). >So In my opinion company's weekly demand for wool means: >the amount of wool which company sold (in it's products) weekly? >Am I right? > >I am not sure what the last sentence means. >Does it mean that the company orders weekly >3500 lb of wool ( it orders wool based on the past >expected value and the past expected value = 3500 from (a)) >and it sells weekly 2500 lb in their products >(and company's demand is only 2,500)? > If so the solution seems to be: >The company should expect to gain weekly: 2500*1$-1000*4$=-1500$ >so in fact it should expect to lose weekly 1500$. >-- > >Am I right? > >Maybe I should consider that the company's weekly demand >is 2500 lb but it orders are: > >Amount of wool (lb) Probability >2500 0.30 >3500 0.45 >4500 0.20 >5500 0.05 > >(Loss | Orders=2500 ) 0$ -1500$ ... >probability 0.30 0.45 > >E(Loss | Orders=2500 ) = 0*0.3+(-1500)*0.45+ ... > > >Please somebody correct me if I am wrong. > >Jan > > > >================================================================= >Instructions for joining and leaving this list and remarks about >the problem of INAPPROPRIATE MESSAGES are available at > http://jse.stat.ncsu.edu/ >================================================================= > > ___________ ----------------------------------------------- | \ Jon Cryer, Professor [EMAIL PROTECTED] ( ) Dept. of Statistics www.stat.uiowa.edu/~jcryer \ \_University and Actuarial Science office 319-335-0819 \ * \of Iowa The University of Iowa dept. 319-335-0706 \ /Hawkeyes Iowa City, IA 52242 FAX 319-335-3017 |__________ ) ----------------------------------------------- V ================================================================= Instructions for joining and leaving this list and remarks about the problem of INAPPROPRIATE MESSAGES are available at http://jse.stat.ncsu.edu/ =================================================================