Question

Suppose that the quarterly sales levels among health care information systems companies are approximately normally distributed with a mean of 12 million dollars and a standard deviation of 1.2 million dollars.
One health care information systems company considers a quarter a "failure" if its sales level that quarter is in the bottom 15% of all quarterly sales levels.


Determine the sales level (in millions of dollars) that is the cutoff between quarters that are considered "failures" by that company and quarters that are not.


(Carry your intermediate computations to at least four decimal places. Round your answer to at least one decimal place.)

Answer 1

Answer:

The cutoff sales level is 10.7436 millions of dollars

Step-by-step explanation:

Problems of normally distributed samples are solved using the z-score formula.

In a set with mean $\mu$ and standard deviation $\sigma$, the zscore of a measure X is given by:

$Z = \frac{X - \mu}{\sigma}$

The Z-score measures how many standard deviations the measure is from the mean. After finding the Z-score, we look at the z-score table and find the p-value associated with this z-score. This p-value is the probability that the value of the measure is smaller than X, that is, the percentile of X. Subtracting 1 by the pvalue, we get the probability that the value of the measure is greater than X.

In this problem, we have that:

$\mu = 12, \sigma = 1.2$

15th percentile:

X when Z has a pvalue of 0.15. So X when Z = -1.047.

$Z = \frac{X - \mu}{\sigma}$

$-1.047 = \frac{X - 12}{1.2}$

$X - 12 = -1.047*1.2$

$X = 10.7436$

The cutoff sales level is 10.7436 millions of dollars