Reference no: EM132829019

Case R12-29

The owner of a local car dealership has just received a call from a regional distributor stating that a $5,000 bonus will be awarded if the owner's dealership sells at least 10 new cars next Saturday. On an average Saturday, this dealership has 75 potential customers look at new cars, but there is no way to determine exactly how many customers will come this particular Saturday. The owner is fairly certain that the number would not be less than 40 but also thinks it would be unrealistic to expect more than 120 (which is the largest number of customers to ever show up in one day). The owner determined that, on average, about 1 out of 10 customers who look at cars at the dealership actually purchase a caror, a 0.10 probability (or 10% chance) exists that any given customer will buy a new car.

1. Create spreadsheet model for the number of cars the dealership might sell next Saturday.

2. What is the probability that the dealership will earn the $5,000 bonus?

3. If you were this dealer, what is the maximum amount of money you would be willing to spend on sales incentives to try to earn this bonus?