Question

A food manufacturer uses an extruder (a machine that makes bite size cookies)that yields revenue for the firm at a rate of $200 per hour when in operation. However, the extruder breaks down an average of two times every day it operates. If Y denotes the number of breakdowns per day, the daily revenue generated by the machine is

R=1600−50Y².
Find the expected daily revenue for the extruder.

Answer 1

$1300

Explanation:

The extruder yields a revenue of $200per hour

Y denotes the number of breakdown per day.

The daily revenue generated is given as

R = 1600 - 50Y^2

We have an average of 2 breakdown per day

Lamda = 2

Represent lamda as β

E(Y) = β

E(Y(Y-1)) = β^2

E(Y^2) = E[Y(Y-1)] + E(Y)

= β^2 + β

E(R) = E(1600 - 50Y^2)

= 1600 - 50E(Y^2)

= 1600 - 50(β^2 +β)

Recall that β = lamda = 2

= 1600 - 50(2^2 + 2)

= 1600 - 50(4+2)

= 1600 - 50(6)

= 1600 - 300

= 1300

$1300

The expected daily revenue of the extruder is $1300