Decision Theory

Each unit of measurement sells for $ 5 Lot size = stage centigrade0 units so the earning per lot = $ 5000 There atomic number 18 two postulates of nature: first state S1 = forged units per lot 15% second state S2 = defective units per lot 35% If no revue for S1 compute of units defective = 15% x gm = one hundred fifty apostrophize of replacement of defective unit direct to the customer = $10 per unit thence the recompense glowering = 5000 ¡V (150 x 10) = $ 3500 If no reexamination for S2 number of units defective = 35% x ascorbic acid0 = 350 Cost of replacement of defective unit sent to the customer = $10 per unit Therefore the pay strike = 5000 ¡V (350 x 10) = $ 1500 If 100% inspection for S1 have greet = 1000 x 2= 2000 Replacement be = $0.50 x 150= $ 75 Therefore the pay off = 5000 ¡V 2000 ¡V75 =2925 If 100% inspection for S2 sampling cost = 1000 x 2= 2000 Replacement cost = $0.50 x 350= $ clxxv Therefore the pay off = 5000 ¡ V 2000 ¡V175 =2825 PAY dark panel         S1: 15% (0.6)         S2: 35% (0.4) Inspect 100%         $ 2925         $ 2825 Do non inspect         $ 3500         $ 1500 Expected pay off if 100% inspection = 0.6 x 2925 + 0.4 x 2825 = $ 2885 Expected pay off if no inspection = 0.6 x 3500 + 0.

4 x 1500 = $ 2700 Based on the memoir of the past year and prior probabilities the company should follow 100% inspection plan. If a try on of size 2 is taken from the lot before deciding whether to inspect 100%: In a sample of 2 there ar tercet possibilities: - ?X 0 unit is defect! ive ?X 1 unit is defective ?X 2 units are defective Probability revision table for each sample outgrowth P (X=0/ p=0.15) = (2/0) x (0.15)^0 x (0.85)^2 = 0.7225 P (X=0/ p=0.35) = (2/0) x (0.35)^0 x (0.65)^2 =... If you want to get a wide-cut essay, order it on our website: BestEssayCheap.com

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