Question: S , setup costs, are based on demand. If q is more than one standard deviation above the mean, the company has to ramp up

S, setup costs, are based on demand. If q is more than one standard deviation above the mean, the company has to ramp up quickly, so setup costs are $600,000. If demand is less than one standard deviation above the mean, the company can be more efficient about its process and setup costs are only $500,000.

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