An automobile manufacturer produces and sells the Energy-Saver Car in North America. It also produces and sells the Smart Little Car in China. In North America, the mean annual number of Energy-Saver Cars produced over the past decade was 12,100. The variance was 8,100. Net revenue for each car sold was $2.1 thousand. (Net revenue is price minus unit variable costs.) The annual fixed costs of the North American facilities were $176 thousand (costs of management, buildings, insurance, etc.). In China, the mean annual number of Smart Little Cars produced over the past decade was 7,500. The variance was 6,400. Net revenue for each car sold was $1.2 thousand. The annual fixed costs of the facility in China were $23 thousand. The covariance between the number of cars produced in North America and the number of cars produced in China was 5,040. Use X and Y to represent the number of cars produced in North America and the number produced in China, respectively. Use PRX and PRY to represent profits in North America and profits in China, respectively. What is the value of mean profit in North America (mean of PRX)?

We will get $7680(thousands)

Explanation:

Answer

If we read the given data values in the passage, it is clear that the mean annual number of smart little cars in china is 7500 and the variance is equal to 6400

The variance is given for the number of cars, but not for the profit.

So, we need to convert the numerical value(number of cars) to money value(profit)

it is given that net revenue per car is $1.2 (thousands)

So, multiplying the net revenue by number of cars

we get, variance in profit = 6400*1.2 = $7680 (thousands)

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