A fast food restaurant just leased a new freezer and food fryer for three years.The service contract for the freezer offers unlimited repairs for a fee of $125 a year plus a $35 service charge for each repair needed.The restaurant's research indicates that during a given year 80% of these freezers need no repairs, 11% needed to be serviced once, 5% twice, 4% three times, and none required more than three repairs.The mean restaurant's annual expense with the service contract for this freezer is ________________________ .
A)$25.20
B)$136.55
C)$122.45
D)$89.90
E)$0

Question

Quizplus · Accepted Answer

To calculate the mean annual expense, we multiply the probability of each scenario by its cost and sum these products. The annual fee is $125, so every scenario includes this cost. The additional costs come from the service charges: $35 for each repair. The calculations are as follows:- 80% of the time, no repairs are needed: $125 * 0.80 = $100 (no additional service charge)- 11% of the time, one repair is needed: ($125 + $35*1) * 0.11 = $17.60- 5% of the time, two repairs are needed: ($125 + $35*2) * 0.05 = $9.50- 4% of the time, three repairs are needed: ($125 + $35*3) * 0.04 = $9.45Adding these expenses gives the mean annual expense: $100 + $17.60 + $9.50 + $9.45 = $136.55.

A Fast Food Restaurant Just Leased a New Freezer and Food