The formula to calculate the expected cost is:
\[ EC = MC \times \frac{P(x)}{100} \]
Where:
Let's say the maximum cost (\( MC \)) is $10,000 and the probability of cost (\( P(x) \)) is 20%. Using the formula:
\[ EC = 10000 \times \frac{20}{100} \]
We get:
\[ EC = 10000 \times 0.20 = 2000 \]
So, the expected cost (\( EC \)) is $2,000.
Expected cost is the anticipated amount of money that will be spent, calculated by multiplying the maximum cost by the probability of the cost occurring. This helps in budgeting and financial planning by providing a more realistic estimate of potential expenses.
Definition: Expected value is the predicted value of a variable, calculated as the sum of all possible values each multiplied by the probability of its occurrence.
Formula: \( E(X) = \sum (x_i \cdot p_i) \)
Example: \( E(X) = (10 \cdot 0.2) + (20 \cdot 0.5) + (30 \cdot 0.3) \)
Definition: Estimated cost is the approximate total cost of a project or operation.
Formula: \( \text{Estimated Cost} = \text{Direct Costs} + \text{Indirect Costs} \)
Example: \( \text{Estimated Cost} = 5000 + 2000 \)
Definition: Expected counts are the predicted frequencies of occurrences in a contingency table.
Formula: \( \text{Expected Count} = \frac{\text{Row Total} \times \text{Column Total}}{\text{Grand Total}} \)
Example: \( \text{Expected Count} = \frac{50 \times 30}{100} \)
Definition: Expected value is the predicted average of all possible values of a random variable.
Formula: \( E(X) = \sum (x_i \cdot p_i) \)
Example: \( E(X) = (5 \cdot 0.1) + (15 \cdot 0.4) + (25 \cdot 0.5) \)
