Question: Problem 3 (10 points) A company has to decide whether to buy or make a component X which is needed for the assembly of a

Problem 3 (10 points) A company has to decide

Problem 3 (10 points) A company has to decide whether to buy or make a component X which is needed for the assembly of a finished product. One thousand units of X are needed for the annual production of the finished product. If the product is made, the annual production cost for X total AED 120,000 with probability 0.6 that X will be satisfactory and 0.4 probability that it will not. If the product is not satisfactory, the company has then to decide if whether to spend another AED 80,000 to redesign or buy X at this stage. The probability of success the second time after redesigning X is 0.9. If component X fails again after the redesign, the company has to buy it from an outside source. Regardless of when the buy decision take place, the unit purchasing cost is AED 2.5 and the vendor development cost is AED 50,000. What is the best decision? What is the worst that can happen to this company? What is the best that can happen to this company

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