A company produces products at a cost of $36 each. Defective products cost an additional $14 each to repair. The probability of no defective products is 80%.

Question

A company produces products at a cost of $36 each. Defective products cost an additional $14 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 700 products?

$ 

Answer 1

I assume that the probability of defective products is 20%. I ignored the statement: "5% defective products"

Number of defective parts = .2 * 700 = 140

Number of good parts = .8 * 700 = 560

Cost to produce 700 parts = 700 * 36 = $25,200

Cost to repair 560 parts = 140 * 14 = $1,960

Total expected cost = $27,160