The fleet manager for the Southern Company, an electrical utility based in Atlanta (parent of Georgia Power), has four alternatives. (1) do nothing, (2) use oil analysis only, (3) replace oil only, or (4) replace oil and do oil analysis. For option (1) the probability of failure is 0.1, and the cost of failure is $1.200. For option (2), the probability of failure remains at 0.1. If the unit is about to fail, the oil analysis will indicate this with probability 0.7; if the unit is not about to fail, the oil analysis will indicate this with probability 0.8. The oil analysis itself costs $20, and if it indicates that failure is about to occur, the oil will be changed at the cost of $14.80 and preventive maintenance will be performed. The cost of preventive maintenance to restore a unit that is about to fail is $500, whereas the cost of maintenance for a unit that is not about to fail is $250. For options (3) and (4), probability of failure decreases from 0.1 to 0.04. Analyze this decision problem. Question Using a decision tree, which alternative should the fleet manager for the Southern Company choose?
The fleet manager for the Southern Company, an electrical utility based in Atlanta (parent of Georgia Power), has four alternatives. (1) do nothing, (2) use oil analysis only, (3) replace oil only, or (4) replace oil and do oil analysis. For option (1) the probability of failure is 0.1, and the cost of failure is $1.200. For option (2), the probability of failure remains at 0.1. If the unit is about to fail, the oil analysis will indicate this with probability 0.7; if the unit is not about to fail, the oil analysis will indicate this with probability 0.8. The oil analysis itself costs $20, and if it indicates that failure is about to occur, the oil will be changed at the cost of $14.80 and preventive maintenance will be performed. The cost of preventive maintenance to restore a unit that is about to fail is $500, whereas the cost of maintenance for a unit that is not about to fail is $250. For options (3) and (4), probability of failure decreases from 0.1 to 0.04. Analyze this decision problem. Question Using a decision tree, which alternative should the fleet manager for the Southern Company choose?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
Related questions
Question
Please explain it using the decision tree!
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 4 images
Recommended textbooks for you
Practical Management Science
Operations Management
ISBN:
9781337406659
Author:
WINSTON, Wayne L.
Publisher:
Cengage,
Operations Management
Operations Management
ISBN:
9781259667473
Author:
William J Stevenson
Publisher:
McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi…
Operations Management
ISBN:
9781259666100
Author:
F. Robert Jacobs, Richard B Chase
Publisher:
McGraw-Hill Education
Practical Management Science
Operations Management
ISBN:
9781337406659
Author:
WINSTON, Wayne L.
Publisher:
Cengage,
Operations Management
Operations Management
ISBN:
9781259667473
Author:
William J Stevenson
Publisher:
McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi…
Operations Management
ISBN:
9781259666100
Author:
F. Robert Jacobs, Richard B Chase
Publisher:
McGraw-Hill Education
Purchasing and Supply Chain Management
Operations Management
ISBN:
9781285869681
Author:
Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:
Cengage Learning
Production and Operations Analysis, Seventh Editi…
Operations Management
ISBN:
9781478623069
Author:
Steven Nahmias, Tava Lennon Olsen
Publisher:
Waveland Press, Inc.