• MC is the maximum cost ($) • P(x) is the probability of cost (%) ## How to Calculate Expected Cost? The following example problems outline how to calculate Expected Cost. Example Problem #1: 1. First, determine the maximum cost ($). The maximum cost ($) is given as 5,000. 2. Next, determine the probability of cost (%). The probability of cost (%) is provided as 70. 3. Finally, calculate the Expected Cost using the equation above: EC = MC * P(x)/100 The values given above are inserted into the equation below: EC = 5000 * .70 = 2500 ($)

Example Problem #2:

The variables needed for this problem are provided below:

maximum cost ($) = 8,000 probability of cost (%) = 25 Entering these values and solving gives: EC = MC * P(x)/100 = 2000 ($)