Pooling multiple demands by either geography or product type allows a statistica
ID: 3333586 • Letter: P
Question
Pooling multiple demands by either geography or product type allows a statistical reduction in variance. For the following five products with:
the combined product has the probability distribution with mean = (sum of other means) and variance = (sum of variances). What is the coefficient of variation of the combined product to two decimal places? How does it compare to the individual products?
Name Average Std. Dev. CV = (sigma/mu) Variance… A123 100 25 0.25 625 B345 100 50 0.50 2500 C345 200 70 0.35 4900 D235 150 30 0.20 900 E324 80 20 0.25 400Explanation / Answer
Product Mean Variance
A123 100 625
B345 100 2500
C345 200 4900
D235 150 900
E324 80 400
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Total 630 9325
Combined product mean = 630
Combined product variance = 9325
So, combined product SD = 96.5660
The coefficient of variation of the combined product = (96.5660/630) = 0.1533
It is noted that the coefficient of variation of the combined product is less than the five products.
The combined product is more precise than the five products.