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# 5-28E .

a.

The given data tabulates bivariate probability distribution for the manufacturing costs
which comprises direct labor and parts. It is required to show the marginal distribution of
direct labor cost and to compute its expected value, variance and standard deviation.

The marginal distribution of labor cost are shown in the last row of the table
corresponding to Total. The expected value for labor cost is as follows:

= 45.3

2 2 2

= 3.81

## The standard deviation of labor cost is as follows:

SD  x   Var  x 
= 3.81
= 1.95

## Therefore, the required answer is: 1.95 .

b.

The marginal distribution of parts cost are shown in the last column of the table
corresponding to Total. The expected value for parts cost is as follows:

E ( y )  0.45  85   0.55  95 
= 90.5

2 2

= 24.75

## The standard deviation of parts cost is as follows:

SD  y   Var  y 
= 24.75
= 4.97

## Therefore, the required answer is: 4.97 .

c.

Define s  x  y , where, x denote the direct labor cost and y denote parts cost, and the
total of these two denote manufacturing cost. The probability distribution for x  y is as
follows:

s f (s)
128 0.05
130 0.2
133 0.2
138 0.25
140 0.2
143 0.1
Table 5c-28E probability distribution for x  y .

## Table 5c-28E probability distribution for x y. See that

f (s  128)  f  s  85  f (s  43) . The rest of the calculations are done accordingly.
d.

Use Excel formula =Sum to calculate the expected value and variance of x  y . The
following screen shot in Excel shows the expected value, E  x  y  and variance,
V  x  y .

## Figure 5d-28E expected value and variance of x  y .

Figure 5d-28E shows the expected value, variance and standard deviation in highlighted
cells.

Therefore, the required answers are 135.8 , 21.26 and 4.61 respectively.

e.

## According to the law of two independent events,

P( A | B)  P( A)

Or

P( B | A)  P( B)

## Otherwise, the events are dependent.

Since, the condition does not hold true for the two events-labor cost and parts cost, the
two events are assumed to be dependent.

f.

The total manufacturing cost for producing 1500 printers is \$198350. It is to check
whether it is same with that of the expected cost.

## Expected value of linear combination of random variables x and y is as follows:

E (ax  by )  aE ( x)  bE ( y ) (1)

## From information given,

E ( x)  45.3, E ( y )  90.5

Substitute the values in the equation (1) and obtain the required return. The required
manufacturing cost is as follows:

## E (1500 x  1500 y )  1500 E ( x)  1500 E ( y )

= 1500  45.3 +1500  90.5 
= 203700

The expected manufacturing cost is higher than actual expenditure. This might be due to
taking inter dependency of the two costs.