Question

Suppose the Shelly Group has identified two possible demand levels for copies per​ month:

Copies ​(per month)	Probability
3 ,500	60​%
10,500	40​%

What is the expected cost if it costs ​$1,150 per month to lease a new copier and the variable cost is ​$.40 for each​ copy?

The expected cost is

​(Enter your response as a whole​ number.)  

Answer 1

The total (expected) cost is given by

Total cost = fixed cost + variable cost*demand

Expected demand = 3500*60% + 10500*40% = 6300

Fixed cost = 1150

Variable cost = 0.40

Total cost = 1150 + 6300*0.40 =3670