Quantitative Methods Q180

0. The 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:

Answer
Comment
Array

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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