The Hit-and-Miss Manufacturing Company produces items that have a probability of being defective. These items are produced in lots of 150. Past experience indicates that for an entire lot is either 0.05 or 0.25. Furthermore, in 80 percent of the lots produced, equals 0.05 (so equals 0.25 in 20 percent of the lots). These items are then used in an assembly, and ultimately their quality is determined before the final assembly leaves the plant. Initially the company can either screen each item in a lot at a cost of $10 per item and replace defective items or use the items directly without screening. If the latter action is chosen, the cost of rework is ultimately $100 per defective item. Because screening requires scheduling of inspectors and equipment, the decision to screen or not screen must be made 2 days before the screening is to take place. However, one item can be taken from the lot and sent to a laboratory for inspection, and its quality (defective or nondefective) can be reported before the screen/no screen decision must be made. The cost of this initial inspection is $125.

Question 1)

If one item is selected, tested, and found to be defective, then all items will be screened in the lot at a cost of $10 per item and defective items will be replaced, otherwise items will be used directly without screening and the cost of rework is $100 per defective item. Construct the decision tree in Silver Decisions and determine the optimal policy. Include a screenshot of your decision tree describe the optimal policy in the space below.