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July 21st, 2013, 11:36 PM   #1
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Average of Range

Which one is correct?

The following array shows the time and cost (minimum and maximum) in forming one unit of item.
Calculate the average total cost.

Time Cost Total Cost (Time * Cost)
Minimum 2 50 100
Maximum 6 80 480

Average Total Benefit = ((2+6)/2*(50+80)/2) ----------(1)
= 260
First take average of maximum and minimum time and of maximum and minimum cost, then use the average time and average cost to arrive at average total cost.


Average Total Benefit = (100+480) / 2 -----------(2)
= 290
First calculate the minimum total cost (minimum time multiplied by minimum cost) and the maximum total cost (maximum time multiplied by maximum cost), then use the two results to arrive at average total benefit

Question: Which of the above methods is the better estimate of the average total cost of forming one item?
And why?
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August 2nd, 2013, 02:04 PM   #2
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Re: Average of Range

Quote:
Originally Posted by jasonjason
Which one is correct?

The following array shows the time and cost (minimum and maximum) in forming one unit of item.
Calculate the average total cost.

Time Cost Total Cost (Time * Cost)
Minimum 2 50 100
Maximum 6 80 480
If I am reading this correctly, in order to form one unit of the first item requires 100 "total cost" while one unit of the second item requires 480 "total cost" so two items together requires 100+ 480= 580. The average "total cost" is 580/2= 290.

Quote:
Average Total Benefit = ((2+6)/2*(50+80)/2) ----------(1)
= 260
First take average of maximum and minimum time and of maximum and minimum cost, then use the average time and average cost to arrive at average total cost.


Average Total Benefit = (100+480) / 2 -----------(2)
= 290
First calculate the minimum total cost (minimum time multiplied by minimum cost) and the maximum total cost (maximum time multiplied by maximum cost), then use the two results to arrive at average total benefit

Question: Which of the above methods is the better estimate of the average total cost of forming one item?
And why?
The second. You are averaging the items, not averaging the "time" and "cost" separately.
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