Modial, Inc. has two alternative means of manufacturing its product. Process A has fixed costs of $20,000 per period and a variable cost of $6 per unit produced. Process B requires fixed costs of $45,000 per period plus a variable cost of $4 per unit produced. The product sells for $8 per unit. The firm has forecast sales to be as follows: Sales units = 8,000 units per period + 0.0002 X (Disposable income) The equation was determined by fitting a regression line to 25 pairs of data relating sales to the disposable income of residents in various marketing areas. The standard error of the estimate is 700 units. The firm estimates that the disposable income of residents in a new marketing area is $25,000,000,
a. If the firm uses process B in this new area, what is the probability of losing money?
b. What is the range of sales (in units) that the firm can expect in the new area with confidence level of 90%?
c. What is the probability that sales in this area will exceed 14,964 units per period?