Posted: October 19th, 2016

Define and explain at least two decision alternatives that the company faces with its quality assurance problem. Choose at random a single value for the parameters D and B from the given range and use them for further calculations

Question 1 The BILLIS & CO warehouse runs a fleet of N=55 small cargo vehicles. Its Quality Assurance unit is concerned about hidden technical faults of these vehicles, which may cause work health and safety (WHS) issues. The company should decide whether to put the vehicles for inspection or not. The cost of finding a hidden technical fault (D, measured in AUD $) may vary between AUD $ 650 and AUD $ 810 depending on the service provider. There is also associated cost B (measured in AUD $) of sampling one vehicle for testing, which may vary between AUD $ 15 AUD and AUD $ 20. continued.… Department of Maritime and Logistics Management JNB252 Analytical Methods for Decision Making 22 The proportion of vehicles with hidden technical faults, Sj, is available from previous studies and may be presented as the following probability distribution: Proportion of faulty vehicles, Sj Probability P(Sj) 0.03 65% 0.05 15% 0.08 20% If no vehicles are inspected, the cost of quality is calculated as C=N x Sj x D, whereas the cost of inspecting all vehicles in the fleet is C=N x B. a. Define and explain at least two decision alternatives that the company faces with its quality assurance problem. Choose at random a single value for the parameters D and B from the given range and use them for further calculations. Build the decision table and give explanation on the structure and calculations within. [3 marks] b. Indicate and explain the recommended decision if the criterion for maximum expected value is implemented. [3 marks] c. Calculate the expected value of perfect information. [4 marks]