A company produces products at a cost of $32 each. Defective products cost an additional $15 each to repair. The probability of no defective products is 80%. The probability of 5% defective products is 20%. What is the expected cost of producing 500 products?

Using the expected value concept, it is found that the expected cost of producing 500 products is $35.

The expected value is given by the sum of each outcome multiplied by it's probability.

In this problem:

The expected cost is:

The expected cost of producing 500 products is $35.

A similar problem is given at link

The expected cost of producing 500 products is $14300

Explanation:

Given:

Cost of products = $32

Cost of repair = $15

Probability of no defective pens = 80%

Probability of defective pens = 20%

Cost of 500 products = ?

Number of defective products =

n = 100

Number of good products =

n(good) = 400

Cost of production of good products = 400 X $32

                                                              = $12800

Cost of defective pens = 100 X $15

                                      = $1500

Expected cost of producing 500 products = $12800 + $1500

                                                                       = $14300

Therefore, the expected cost of producing 500 products is $14300

step-by-step explanation:

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