The Quality Control Manager for the NKA Inc Based on Historical Data,if the Lot Is of Poor Quality,40

question 93

Essay

The quality control manager for the NKA Inc.must decide whether to accept (alternative 1),further analyze (alternative 2),or reject (alternative 3)the shipment (lot)of incoming material.The historical data indicates that there is 30% chance that the lot is poor quality (S₁),50% chance that the lot is fair quality (S₂),and 20% chance that the lot is good quality (S₃).Assume the following payoff table is available.The values in the payoff table are in thousands of dollars. $$\begin{array} { l c c c } & { \text { States of Nature } } \\\text { Decision } & \mathrm { S } _ { 1 } & \mathrm {~S} _ { 2 } & \mathrm {~S} _ { 3 } \\\text { Accept } & 20 & 30 & 90 \\\text { Further analyze } & 60 & 70 & 15 \\\text { Reject } & 80 & 50 & 30\end{array}$$ Based on historical data,if the lot is of poor quality,40% of the items are defective.If the lot is fair quality,22% of the items are defective.If the lot is good quality,10 % of the items are defective.The quality control manager inspects one unit from a recent shipment.
-After inspecting one unit,the manager determines that the unit is defective.If the inspected item is defective,determine which alternative action the quality control manager should choose.

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Definitions:

Christmas Trees

In the oil and gas industry, an assembly of valves, spools, and fittings used on a wellhead to control the flow of oil and gas.

Differential Cost

The difference in cost between two alternative decisions, or a change in cost from one period to the next.

Incremental Cost

The additional cost that a company incurs when producing one more unit of a product.

Incremental Costs

Costs that change as a result of a decision to increase or decrease the level of an activity or operation.