Chat with AI
Introduction to Management Science 12th Edition by Bernard Taylor
Edition 12ISBN: 978-0133778847Introduction to Management Science 12th Edition by Bernard Taylor
Edition 12ISBN: 978-0133778847 Exercise 54
Blue Ridge Power and Light is an electric utility company with a large fleet of vehicles, including automobiles, light trucks, and construction equipment. The company is evaluating four alternative strategies for maintaining its vehicles at the lowest cost: (1) do no preventive maintenance at all and repair vehicle components when they fail; (2) take oil samples at regular intervals and perform whatever preventive maintenance is indicated by the oil analysis; (3) change the vehicle oil on a regular basis and perform repairs when needed; (4) change the oil at regular intervals, take oil samples regularly, and perform maintenance repairs as indicated by the sample analysis.
For autos and light trucks, strategy 1 (no preventive maintenance) costs nothing to implement and results in two possible outcomes: There is a.10 probability that a defective component will occur, requiring emergency maintenance at a cost of $1,200, or there is a.90 probability that no defects will occur and no maintenance will be necessary.
Strategy 2 (take oil samples) costs $20 to implement (i.e., take a sample), and there is a.10 probability that there will be a defective part and.90 probability that there will not be a defect. If there is actually a defective part, there is a.70 probability that the sample will correctly identify it, resulting in preventive maintenance at a cost of $500. However, there is a.30 probability that the sample will not identify the defect and indicate that everything is okay, resulting in emergency maintenance later at a cost of $1,200. On the other hand, if there are actually no defects, there is a.20 probability that the sample will erroneously indicate that there is a defect, resulting in unnecessary maintenance at a cost of $250. There is an.80 probability that the sample will correctly indicate that there are no defects, resulting in no maintenance and no costs.
Strategy 3 (changing the oil regularly) costs $14.80 to implement and has two outcomes: a.04 probability of a defective component, which will require emergency maintenance at a cost of $1,200, and a.96 probability that no defects will occur, resulting in no maintenance and no cost.
Strategy 4 (changing the oil and sampling) costs $34.80 to implement and results in the same probabilities of defects and no defects as strategy 3. If there is a defective component, there is a.70 probability that the sample will detect it and $500 in preventive maintenance costs will be incurred. Alternatively, there is a.30 probability that the sample will not detect the defect, resulting in emergency maintenance at a cost of $1,200. If there is no defect, there is a.20 probability that the sample will indicate that there is a defect, resulting in an unnecessary maintenance cost of $250, and there is an.80 probability that the sample will correctly indicate no defects, resulting in no cost.
Develop a decision strategy for Blue Ridge Power and Light and indicate the expected value of this strategy.1
For autos and light trucks, strategy 1 (no preventive maintenance) costs nothing to implement and results in two possible outcomes: There is a.10 probability that a defective component will occur, requiring emergency maintenance at a cost of $1,200, or there is a.90 probability that no defects will occur and no maintenance will be necessary.
Strategy 2 (take oil samples) costs $20 to implement (i.e., take a sample), and there is a.10 probability that there will be a defective part and.90 probability that there will not be a defect. If there is actually a defective part, there is a.70 probability that the sample will correctly identify it, resulting in preventive maintenance at a cost of $500. However, there is a.30 probability that the sample will not identify the defect and indicate that everything is okay, resulting in emergency maintenance later at a cost of $1,200. On the other hand, if there are actually no defects, there is a.20 probability that the sample will erroneously indicate that there is a defect, resulting in unnecessary maintenance at a cost of $250. There is an.80 probability that the sample will correctly indicate that there are no defects, resulting in no maintenance and no costs.
Strategy 3 (changing the oil regularly) costs $14.80 to implement and has two outcomes: a.04 probability of a defective component, which will require emergency maintenance at a cost of $1,200, and a.96 probability that no defects will occur, resulting in no maintenance and no cost.
Strategy 4 (changing the oil and sampling) costs $34.80 to implement and results in the same probabilities of defects and no defects as strategy 3. If there is a defective component, there is a.70 probability that the sample will detect it and $500 in preventive maintenance costs will be incurred. Alternatively, there is a.30 probability that the sample will not detect the defect, resulting in emergency maintenance at a cost of $1,200. If there is no defect, there is a.20 probability that the sample will indicate that there is a defect, resulting in an unnecessary maintenance cost of $250, and there is an.80 probability that the sample will correctly indicate no defects, resulting in no cost.
Develop a decision strategy for Blue Ridge Power and Light and indicate the expected value of this strategy.1
Explanation
Verified
Verified
Develop a decision tree using QM softwar...
Introduction to Management Science 12th Edition by Bernard Taylor
Why don’t you like this exercise?
Other Minimum 8 character and maximum 255 character
Character 255
