Can someone help me resolve this question? how do I tackle these types of questions on the PMp exam?
You are trying to determine whether or not to conduct 100% final system tests of 500 ground-based radar units at the factory. The historical radar field failure rate is 4%; the cost to test each unit in the factory is $10,000; the cost to reassemble each passed unit after the factory test is $2,000; the cost to repair and reassemble each failed unit after factory test is $23,000; and the cost to repair and reinstall each failed unit in the field is $350,000. Using decision tree analysis, what is the expected value if you decide to conduct these tests?
I think the correct answer is $6.42 million the details as below:
1- 96% pass the test = cost of testing = 96% * 500 unit * 10k = 5M
2- cost to resemble passed units = 96% * 500 unit * 2k = .96 M
3- cost to resemble and repair each failed unit after the factory test = .04* 500 unit * 23k = .46 M
so the total cost of to conduct the tests is 5M+.96M+.46M = 6.42 million
and the cost of not performing the test is "the cost to repair and reinstall each failed unit in the field" which = 0.04% * 500 * 350 K = 7 million.
so in this case conducting the tests would be the best option (but this is not part of the question )
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