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Answer (C) is correct . The semiautomatic machine has an expected cost of $170,000 based on an expected demand of 300,000 units [(.4 ¡Á 200,000) + (.3 ¡Á 300,000) + (.2 ¡Á 400,000) + (.1 ¡Á 500,000)]. The single purpose machine has an expected cost of $200,000 [($.60 ¡Á 300,000) + $20,000]. The automatic machine has an expected cost of $180,000 [($.20 ¡Á 300,000) + $120,000)]. Hence, the semiautomatic machine has the lowest expected cost at the expected level of deman
Answer (A) is incorrect because The single purpose machine is not the best choice based on the expected demand level.
Answer (B) is incorrect because The automatic machine is not the best choice based on the expected demand level.
Answer (D) is incorrect because The automatic machine has the second lowest expected cost.