Original practice · fully worked
Original variant: revenue from overlapping software add-ons
Among 100 software orders, 45% include analytics, 30% include archival storage, and 51% include exactly one of those two add-ons. Analytics alone costs 20 dollars, storage alone costs 30 dollars, and an order containing both is charged a 40-dollar bundle price. Calculate the expected total add-on revenue from the 100 orders.
- A
480 - B
1,200 - C
1,680 - D
1,800 - E
2,280
Answer and calculation
If x is the probability of both add-ons, then 0.45+0.30-2x=0.51, so x=0.12. Pricing the analytics-only, storage-only, and bundle groups gives expected revenue 1,680, so choice C.
Setup
Setup
Let x be the probability that an order includes both add-ons. The exactly-one probability counts each marginal group after removing the overlap twice.
0.45+0.30−2x=0.51 Model
Model
Solve for the overlap and then obtain the two exclusive purchase probabilities.
Pr(A only)=0.45−0.12=0.33 Pr(S only)=0.30−0.12=0.18 Compute
Compute
Compute expected add-on revenue per order and scale to 100 orders.
E[R1]=20(0.33)+30(0.18)+40(0.12)=16.80 E[R100]=100(16.80)=1,680 Answer
Answer
The expected total add-on revenue is 1,680 dollars.
1,680(C)