Suppose the shelly group has identified two possible demand levels for copies per month: copies (per month) probability 4 comma 000 40% 9 comma 000 60% what is the expected cost if it costs $1 comma 050 per month to lease a new copier and the variable cost is $0.25 for each copy? the expected cost is $ 0. (enter your response as a whole number.)

expected cost = $2800 per month

Explanation:

given data

Copies (per month)  = 4,000

probability = 40%

copies (per month) = 9,000

probability = 60%

lease new copier = $1,050

variable cost = $0.25

to find out

What is the expected cost

solution

we know that expected cost is here

expected cost = fixed cost + variable cost     1

and here demand of copies per month is express as

= ( 40 % of 4000 ) + ( 60% of 9000 )

= 1600 + 5400 = 7000

so from equation 1

expected cost = fixed cost + variable cost

expected cost = 1050 + 0.25 × 7000

expected cost = 1050 + 1750

expected cost = $2800 per month

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