A builder of houses needs to order some supplies that have a waiting time Y for delivery, with a continuous uniform distribution over the interval from 1 to 4 days. Because she can get by without them for 2 days, the cost of the delay is fixed at $400 for any waiting time up to 2 days. After 2 days, however, the cost of the delay is $400 plus $50 per day (prorated) for each additional day. That is, if the waiting time is 3.5 days, the cost of the delay is $400 $50(1.5)
Find the expected value of the builder’s cost due to waiting for supplies.

The Expected cosy of the builder is $433.3

Step-by-step explanation:

$400 is the fixed cost due to delay.

Given Y ~ U(1,4).

Calculating the Variable Cost, V

V = $0 if Y≤ 2

V = 50(Y-2) if Y > 2

This can be summarised to

V = 50 max(0,Y)

Cost = 400 + 50 max(0, Y-2)

Expected Value is then calculated by;

Waiting day =2

Additional day = at least 1

Total = 3

E(max,{0, Y - 2}) = integral of Max {0, y - 2} * ⅓ Lower bound = 1; Upper bound = 4, (4,1)

Reducing the integration to lowest term

E(max,{0, Y - 2}) = integral of (y - 2) * ⅓ dy Lower bound = 2; Upper bound = 4 (4,2)

E(max,{0, Y - 2}) = integral of (y) * ⅓ dy Lower bound = 0; Upper bound = 2 (2,0)

Integrating, we have

y²/6 (2,0)

= (2²-0²)/6

= 4/6 = ⅔

Cost = 400 + 50 max(0, Y-2)

Cost = 400 + 50 * ⅔

Cost = 400 + 33.3

Cost = 433.3

the expected value of the builder’s cost due to waiting for supplies is $433.3

Step-by-step explanation:

Due to the integration symbol and also for ease of understanding, i have attached the explanation as an attachment.

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step-by-step explanation: