Roy and Jennie are looking for a company to help plan their wedding.

Question

Company A charges an amount based on the cost function, C=Vn + F, where C is total cost, V is variable cost, F is fixed cost, and n is the number of people who attend the wedding. Suppose n is a random variable with mean=42, Standard deviation=8. V=40 and F=2750. (Round answers to nearest dollar)

a) What is the mean for the total cost?

b) What is the standard deviation for the total cost?

Answer 1

mean C = Vn + F = V * mean(n) + F = 40 * 42 + 2750 = 4439

var C = V^2*Var(n) = 1600 * 64 = 102,400; std dev = 320