4. You are making a make-or-buy decision about an item that you sell for $12. If...

 

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4. You are making a make-or-buy decision about an item that you sell for $12. If you outsource this item, it will cost you $5 each. If you make the item, you have two choices: a) buy a new machine for $135,000 and have a unit cost of $4.25 or b) buy an older model machine for $100,000 and the unit cost is $4.75 each. There is a 45% chance you will sell 75,000 units, and a 55% change you will sell 100,000 unites. a) Draw the decision tree appropriate to the alternatives and outcomes stated b) Calculate the EMV for all three options. Which is the best choice? 4. You are making a make-or-buy decision about an item that you sell for $12. If you outsource this item, it will cost you $5 each. If you make the item, you have two choices: a) buy a new machine for $135,000 and have a unit cost of $4.25 or b) buy an older model machine for $100,000 and the unit cost is $4.75 each. There is a 45% chance you will sell 75,000 units, and a 55% change you will sell 100,000 unites. a) Draw the decision tree appropriate to the alternatives and outcomes stated b) Calculate the EMV for all three options. Which is the best choice?

Answer rating: 100% (QA)

GIVEN EXCEL FORMULA B EMV of Buy 045525000055700000 621... View the full answer