# Question: Allegheny Mountain Power and Light is an electric utility company

Allegheny Mountain 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) including take 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; and (4) change the oil at regular intervals and take oil samples regularly, performing 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 0.08 probability that a defective component will occur, requiring emergency maintenance at a cost of $1600, or there is 0.92 probability that no defects will occur and no maintenance will be necessary.

Strategy 2 (take oil samples) costs $40 to implement (i.e., take a sample), and there is a 0.08 probability that there will be a defective part and 0.92 probability that there will not be a defect. If there is actually a defective part, there is a 0.70 probability the sample will correctly identify it, resulting in preventive maintenance at a cost of $500. However, (here is a 0.30 probability that the sample will not identify the defect and indicate everything is okay, resulting in emergency maintenance later at a cost of $1600. On the other hand, if there are actually no defects, there is a 0.20 probability that the sample will erroneously indicate that there is a defect, resulting in unnecessary maintenance at a cost of $250. There is a 0.80 probability that the sample will correctly indicate there are no defects, resulting in no maintenance and no costs.

Strategy 3 (changing the oil regularly) costs $34.80 to implement and has two outcomes: a 0.04 probability of a defective component, which will require emergency maintenance at a cost of $1600, and a 0.96 probability that no defects will occur, resulting in no maintenance and no cost.

Strategy 4 (changing the oil and sampling) costs $54.80 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 0.70 probability that the sample will detect it and $500 in preventive maintenance costs will be incurred. Alternatively, there is a 0.30 probability that the sample will not detect the defect, resulting in emergency maintenance at a cost of $1600. If there is no defect, there is a 0.20 probability the sample will indicate there is a defect, resulting in an unnecessary maintenance cost of $250, and a 0.80 probability that the sample will correctly indicate no defects, resulting in no cost.

Develop a decision strategy for Allegheny Mountain Power and Light and indicate the expected value of this strategy.

Strategy 2 (take oil samples) costs $40 to implement (i.e., take a sample), and there is a 0.08 probability that there will be a defective part and 0.92 probability that there will not be a defect. If there is actually a defective part, there is a 0.70 probability the sample will correctly identify it, resulting in preventive maintenance at a cost of $500. However, (here is a 0.30 probability that the sample will not identify the defect and indicate everything is okay, resulting in emergency maintenance later at a cost of $1600. On the other hand, if there are actually no defects, there is a 0.20 probability that the sample will erroneously indicate that there is a defect, resulting in unnecessary maintenance at a cost of $250. There is a 0.80 probability that the sample will correctly indicate there are no defects, resulting in no maintenance and no costs.

Strategy 3 (changing the oil regularly) costs $34.80 to implement and has two outcomes: a 0.04 probability of a defective component, which will require emergency maintenance at a cost of $1600, and a 0.96 probability that no defects will occur, resulting in no maintenance and no cost.

Strategy 4 (changing the oil and sampling) costs $54.80 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 0.70 probability that the sample will detect it and $500 in preventive maintenance costs will be incurred. Alternatively, there is a 0.30 probability that the sample will not detect the defect, resulting in emergency maintenance at a cost of $1600. If there is no defect, there is a 0.20 probability the sample will indicate there is a defect, resulting in an unnecessary maintenance cost of $250, and a 0.80 probability that the sample will correctly indicate no defects, resulting in no cost.

Develop a decision strategy for Allegheny Mountain Power and Light and indicate the expected value of this strategy.

## Answer to relevant Questions

State University has three healthcare plans for its faculty and staff to choose from, as follows.Plan 1—monthly cost of $32 with a $500 deductible; the participants pay the first $500 of medical payments for the year, the ...For an airline you have flown on list all of the quality “defects” you can recall. Discuss whether you think the airline exhibited overall good or poor quality. If it exhibited good quality, explain what made it so; if ...One of the difficult aspects of global supply chain management is en- swing quality across a number of different suppliers. Discuss how a company can ensure quality along its supply chain.The Southern Mills Company produces denim cloth. During the weaving process, dyed yam on large, round beams is fed into looms where it is woven into cloth. During this weaving process the yams are stretched beyond their ...The Metro Packaging Company in Richmond produces clear plastic bottles for the Kooler Cola Company, a soft-drink manufacturer. Metro inspects each lot of 5000 bottles before they are shipped to the Kooler Company. The ...Post your question