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Q1 Audio Streaming. An audio streaming service offers music and podcasts. Most music is owned by record labels and the streaming service pays a copyright license fee each time a piece of music is streamed. By contrast, the streaming service purchases podcasts outright, paying a flat rate for each edition of the podcast, independent of the number of users that stream it. Forecasts of costs and revenues (from subscriptions and advertising) next year are Normally distributed and are given in the table as a central range within which there is 90% probability. For example, in units of $m, mean value of license fees (24.5 + 27.2)/2 25.85; P(24.5< license fees < 27.2) = 0.9. Cost of license fees ($m) Cost of purchasing podcasts ($m) Revenues (from subscriptions and advertising) |($m) (24.5, 27.2) (1.1, 6.2) (43.9, 51.9) (a) (b) assumption clearly and comment on whether you think it is valid. Are total costs Normally distributed? Give a reason for your answer. What is the coefficient of variation of each of the items in the table? What is the central range within which there is 90% probability for total costs? State your (c) Revenues are related to the number of subscribers, as are licence fee costs, so that they are correlated. Revenues and total costs have a correlation coefficient of 0.58. What is the central range within which there is 90% probability for profits = revenues minus total costs? (d) What is the coefficient of variation of profits?

Q1 Audio Streaming. An audio streaming service offers music and podcasts. Most music is owned by record labels and the streaming service pays a copyright license fee each time a piece of music is streamed. By contrast, the streaming service purchases podcasts outright, paying a flat rate for each edition of the podcast, independent of the number of users that stream it. Forecasts of costs and revenues (from subscriptions and advertising) next year are Normally distributed and are given in the table as a central range within which there is 90% probability. For example, in units of $m, mean value of license fees (24.5 + 27.2)/2 25.85; P(24.5< license fees < 27.2) = 0.9. Cost of license fees ($m) Cost of purchasing podcasts ($m) Revenues (from subscriptions and advertising) |($m) (24.5, 27.2) (1.1, 6.2) (43.9, 51.9) (a) (b) assumption clearly and comment on whether you think it is valid. Are total costs Normally distributed? Give a reason for your answer. What is the coefficient of variation of each of the items in the table? What is the central range within which there is 90% probability for total costs? State your (c) Revenues are related to the number of subscribers, as are licence fee costs, so that they are correlated. Revenues and total costs have a correlation coefficient of 0.58. What is the central range within which there is 90% probability for profits = revenues minus total costs? (d) What is the coefficient of variation of profits?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Q1 Audio Streaming. An audio streaming service offers music and podcasts. Most music is owned by record labels and the streaming service pays a copyright license fee each time a piece of music is streamed. By contrast, the streaming service purchases podcasts outright, paying a flat rate for each edition of the podcast, independent of the number of users that stream it. Forecasts of costs and revenues (from subscriptions and advertising) next year are Normally distributed and are given in the table as a central range within which there is 90% probability. For example, in units of $m, mean value of license fees = (24.5 + 27.2) /2 = 25.85; P(24.5 < license fees < 27.2) = 0.9. Cost of license fees ($m) Cost of purchasing podcasts ($m) Revenues (from subscriptions and advertising) ($m) (24.5, 27.2) (1.1, 6.2) (43.9, 51.9) (a) (b) What is the coefficient of variation of each of the items in the table? What is the central range within which there is 90% probability for total costs? State your assumption clearly and comment on whether you think it is valid. Are total costs Normally distributed? Give a reason for your answer. (c) Revenues are related to the number of subscribers, as are licence fee costs, so that they are correlated. Revenues and total costs have a correlation coefficient of 0.58. What is the central range within which there is 90% probability for profits = revenues minus total costs? (d) What is the coefficient of variation of profits?
Transcribed Image Text:Q1 Audio Streaming. An audio streaming service offers music and podcasts. Most music is owned by record labels and the streaming service pays a copyright license fee each time a piece of music is streamed. By contrast, the streaming service purchases podcasts outright, paying a flat rate for each edition of the podcast, independent of the number of users that stream it. Forecasts of costs and revenues (from subscriptions and advertising) next year are Normally distributed and are given in the table as a central range within which there is 90% probability. For example, in units of $m, mean value of license fees = (24.5 + 27.2) /2 = 25.85; P(24.5 < license fees < 27.2) = 0.9. Cost of license fees ($m) Cost of purchasing podcasts ($m) Revenues (from subscriptions and advertising) ($m) (24.5, 27.2) (1.1, 6.2) (43.9, 51.9) (a) (b) What is the coefficient of variation of each of the items in the table? What is the central range within which there is 90% probability for total costs? State your assumption clearly and comment on whether you think it is valid. Are total costs Normally distributed? Give a reason for your answer. (c) Revenues are related to the number of subscribers, as are licence fee costs, so that they are correlated. Revenues and total costs have a correlation coefficient of 0.58. What is the central range within which there is 90% probability for profits = revenues minus total costs? (d) What is the coefficient of variation of profits?
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