CASE STUDY 1 - cont
The information provided in the above problem statement is sufficient to quantify the cost of conducting the test under each combination of design choice and event.. This constitutes Phase 4 -Quantifying the outcome of every combination of decision alternatives and relevant events.
We come now to Phase 5: Application of a decision rule. Let's say that we will choose the option that minimizes the expected cost of testing. Let C(WU) be the cost of the test if the generator works without it first being overhauled, with a similar notation for the overhaul option. The expected cost (EC) of using the generator in its current condition is
EC(U) = C(WU) Pr(WU) + C(FU) Pr (FLi) = (10)(0.70) + (35)(0.30) = 17.5