Question

A firm’s marketing manager believes that total sales for next year will follow the normal distribution, with a mean of $3.2 million and a standard deviation of $250,000. Determine the sales level that has only a 3% chance of being exceeded next year.

Answer 1

Answer: $3,670,198

Explanation:

Here, the mean, μ, is 3.2 million =3,200,000 and the standard deviation, σ, is 250,000. Let x be sales for next year. To determine the sales level that has only a 3% chance of being exceeded next year, the area to the right of x is 0.03. So the area to the left of x is 1−0.03=0.97.

Open Excel. Click on an empty cell. Type =NORM.INV(0.97,3200000,250000) and press ENTER.

Round the answer to the nearest dollar, is x≈3,670,198. Thus, the sales level that has only a 3% chance of being exceeded next year is $3,670,198.