A drone company has a new app based programmable toy that they are planning to market
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A drone company has a new app based programmable toy that they are planning to market

Problem 2

A drone company has a new app based programmable toy that they are planning to market. The proposed price of the mini-drone is $12.00, and marketing expects to sell 850,000 units, following a normal distribution with a mean of 800,000 and the relatively high standard deviation of 275,000 (and a minimum of o). Production costs are estimated to be normally distributed with a mean of $565,000 and a standard deviation of $52,000. Per-unit costs are normally distributed with a mean of $3.00 and a standard deviation of $0.25. Selling expenses are log normally distributed with a mean of $900,000 and standard deviation of $50,000. General and administrative costs are fixed at $300,000.

a. Identify the mean and standard deviation, and range for profit.

Hint
StatisticsNet profit = sales revenue - COGS - production - Selling epenses - G&Awhere, Sales revenue = volume * selling priceCOGS = Volume * Cost per unitLog normal = LN(Selling epenses)...

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