according to the respective probabilities 0.25, 0.35, 0.25 and 0.15. Three customers have contracts to receive lots from the manufacturer. The contracts specify that the percentages of defectives in lots shipped to customers A, B, and C should not exceed 7, 10, and 12, respectively. If a lot has a higher percentage of defectives than stipulated, a penalty of $300 per percentage point is incurred. On the other hand, supplying better quality than required costs the manufacturer $100 per percentage point. If the lots are not inspected prior to shipment, which customer should have the highest priority for receiving the order?
In a manufacturing process, lots having 7%, 10%, 12% or 14% defectives are produced according to the respective probabilities 0.25, 0.35, 0.25 and 0.15. Three customers have contracts to receive lots from the manufacturer. The contracts specify that the percentages of defectives in lots shipped to customers A, B, and C should not exceed 7, 10, and 12, respectively. If a lot has a higher percentage of defectives than stipulated, a penalty of $300 per percentage point is incurred. On the other hand, supplying better quality than required costs the manufacturer $100 per percentage point. If the lots are not inspected prior to shipment, which customer should have the highest priority for receiving the order?
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