Author Question: Describe the definition of a planning horizon in a paragraph. ... (Read 54 times)

hubes95 · **on:** Aug 1, 2018

Describe the definition of a planning horizon in a paragraph.

Question 2

An executive with a fast food restaurant believes a street located near a major highway interchange will be a profitable location. A random sample of sixty days is taken to estimate the average cars per day passing by the location. On the basis of the sample data, the executive concludes that the average is not high enough to yield a profitable outlet. Six months later a competitor builds at the same location and reports it to be one of its best-profit new stores. Describe the type of error made by the executive.

harveenkau8139 · **Reply #1 on:** Aug 1, 2018

Answer to Question 1

Read about planning horizon

Answer to Question 2

Apparently a minimum number of cars passing by the location is needed to be profitable. Since the average number of cars in the sample was not enough to make a profitable outlet in the judgment of the executive, he rejected the hypothesis of profitability. When another company built a store on the same location , which was profitable, it showed the mistake, which had been made. In statistical terms, the executive committed a Type I error (erroneously rejecting a true null hypothesis).