Quantitative Methods Q180
180The total cost of producing mugs is given by the equation: C = 2.5Q + 2000, where C is the total cost in dollars, USD2.5 is the variable cost per unit, Q is the number of units, and USD2000 is the fixed cost. The quantities and the probabilities of producing the respective quantities are given in the table below:
| Probability | Quantity |
| 0.30 | 200 |
| 0.50 | 300 |
| 0.20 | 400 |
The total expected cost of manufacturing mugs is closest to:
- Option : A
- Explanation : First, calculate the expected number of units produced given the probabilities. E (Q) = (200 * 0.3) + (300 * 0.5) + (400 * 0.2) = 290 Use this in the equation to determine the total cost. Total cost = 2.5 (290) + 2000 = $2,725
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