The Quality Control Manager for ENTA Inc -What Action Would You Choose According to Expected Value Criterion

question 119

Essay

The quality control manager for ENTA Inc. must decide whether to accept (A1), further analyze (A2), or reject (A3) a lot of incoming material. Assume the following payoff table is available. 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).
$$\begin{array} { l r r r } & \mathbf { S } _ { \mathbf { 1 } } & \mathbf { S } _ { \mathbf { 2 } } & \mathbf { S } _ { \mathbf { 3 } } \\\mathbf { A } _ { \mathbf { 1 } } & 20 & 30 & 90 \\\mathbf { A } _ { \mathbf { 2 } } & 60 & 70 & 10 \\\mathbf { A } _ { \mathbf { 3 } } & 80 & 50 & 40\end{array}$$
-What action would you choose according to expected value criterion?

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Definitions:

Point System Job Evaluation

A quantitative method of determining the value of a job in relation to other jobs within an organization by scoring it on various factors.

Allocating Points

The process of distributing or assigning points based on certain criteria, often used in scoring systems, evaluations, or resource management.

Individual Incentive Plan

Compensation strategy designed to reward employees based on their individual performance achievements.

Piecework

A payment method based on the amount of work completed rather than the time taken, frequently used in manufacturing and agriculture.