An equipment proposal from two vendors A and B have been received from a local company. The quality of these equipment have been varying and consequently the cost of manufacturing the product using these two different equipment has also varied. The varying costs based on the probabilities of defects are given in table below.
Determine the better vendor.
$\begin{array}{|l|l|l|l|l|l|l|l|l|}
\hline \text { vendor }&\text { Prob.Defect. } & 0.10 & 0.25 & 0.10 & 0.12 & 0.13 & 0.16 & 0.14 \
\hline A&\text { Mfg. Cost } & \$ 20 & 25 & 19 & 21 & 23 & 22 & 20.80 \
\hline \text { vendor }&\text { Prob.Defect } & 0.14 & 0.12 & 0.19 & 0.06 & 0.24 & 0.08 & 0.17 \
\hline B&\text { Mfg. Cost } & \$ 20 & 18 & 25 & 14 & 30 & 16 & 22 \
\hline
\end{array}$
A) Vendor A
B) Vendor B

Question

Quizplus · Accepted Answer

Vendor A has a lower expected manufacturing cost when considering the probabilities of defects. Calculating the expected cost for both vendors, Vendor A's expected cost is lower than Vendor B's.

An Equipment Proposal from Two Vendors a and B Have