The purchasing agent for a PC manufacturer is currently negotiating a purchase agreement for a particular electronic
Question:
Although the PC manufacturer can repair a defective component at a cost of $20 each, the purchasing agent learns that this supplier will now assume the cost of replacing defective components in excess of the first 100 faulty items found in a given lot. This guarantee may be purchased by the PC manufacturer prior to the receipt of a given lot at a cost of $1000 per lot. The purchasing agent wants to determine whether it is worthwhile to purchase the supplier’s guarantee policy.
a. Create a cost table that specifies the PC manufacturer’s total cost (in dollars) of purchasing and repairing (if necessary) a complete lot of components for each possible decision and each outcome with respect to the proportion of defective items.
b. Use Precision Tree to identify the strategy that minimizes the expected total cost of achieving a complete lot of satisfactory microcomputer components.
c. Perform a sensitivity analysis on the optimal decision with respect to the number of components per lot and the three monetary inputs, and summarize your findings. In response to which of these inputs is the expected cost most sensitive?
Distribution
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Data Analysis and Decision Making
ISBN: 978-0538476126
4th edition
Authors: Christian Albright, Wayne Winston, Christopher Zappe
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