A small retailer is considering various monthly plans for purchasing electricity. With one plan they are charged 5 cents per kWh no matter what is their consumption. With a second plan, they can prepurcnhase kWhs at the cost of 4.5 cents per kWh. If they don’t use all of the kWhs they purchase, then there is no refund for the unused electricity. If they need more kWhs than they purchase, the extra kWhs are purchased at the rate of 6 cents per kWh. Their forecast for kWh usage per month is normally distributed with a mean of 6000 and a standard deviation of 2500.
a. Suppose they choose the first plan, the flat rate of 5 cents per kWh. What will be their expected monthly bill?
There monthly bill will be = mean * cost = 6000*5 = $300.
b. Their forecast for kWh usage per month is normally distributed with a mean of 6000 and a standard deviation of 2500.
Suppose they choose the second plan, 4.5 cents per pre purchased kWh which is nonrefundable
and 6 cents per additional kWh. How many kWs should they pre purchase?