P (2 or more failures) = 1 – P (0 or 1 failure) = 1 - 0.736 = 0.264 — After you have given your boss information Problem considers how accurate been

After you have given your boss your information in Problem 9.33, he considers how accurate you have been in the past when you have made such assessments. In fact, he decides you are somewhat optimistic (and he believes in Murphy’s Law), so he assigns a Poisson distribution with m = 1 to the occurrence of machine breakdowns during your two-week vacation. Now the boss has a decision to make. He either can close the part of the plant involving the machines in question, at a cost of $10,000, or he can leave that part up and running.

Of course, if there are no machine failures, there is no cost. If there is only one failure, he can work with the remaining equipment until you return, so the cost is effectively zero. If there are two or more failures, however, there will be assembly time lost, and he will have to call in experts to repair the machines immediately. The cost would be$15,000. What should he do?

SOLUTION