Develop a decision analysis formulation for problem

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Question: The Hit and Miss Manufacturing Company produces items that have a probability of being defective. These items are produced in lots of 150. Past experience indicates that for the entire lot is either 0.05 or 0.25. Furthermore, in 80 percent of the lots produced, equals 0.05. (So = 0.25 in 20 percent of the lots). These items are used in an assembly, and ultimately their quality is determined before the final assembly leaves the plant. Initially the company can either screen each item in a lot at a cost of $10 per item and replace defective items or use the items directly without screening. If the latter is chosen, the cost of rework is $1 00 per defective item. Because screening requires scheduling of inspectors and equipment, the decision to screen or not screen must be made two days before the screening can take place.

a. Develop a decision analysis formulation for this problem (define the states of nature, the alternatives, and the payoff table.

b. What decision should be made according to the maxima decision rule?

c. What decision should be made according to the maximin decision rule?

d. What decision should be made according to the minimax regret decision rule?

e. What decision should be made according to the expected value decision rule?

Reference no: EM131876695

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