Question: Question 3

In a survey of 15 manufacturing firms, the number of firms that use LIFO (a last-in first-out accounting procedure for inventory) is a binomial random variable x with n=15 and p=0.2.

a) What is the probability that five or fewer firms will be found to use LIFO? Is it unlikely that more than 10 firms will be found to use LIFO? Comment.

b) Plot the probability distribution of x. Is the distribution highly skewed?

c) What are the mean and the standard deviation of x. What is the coefficient of variation of x? What would be the value of this coefficient if 150 firms were surveyed rather than 15 (continue to assume that p=0.2)? Describe the effect of the larger survey on the relative variability of x.