Can someone help me how to solve the following problem please ? Can you show me
ID: 2426161 • Letter: C
Question
Can someone help me how to solve the following problem please ? Can you show me the details of the calculations please and let me know how to setup the risk profifles ? Thanks for your help
EastBend Corporation is interested in producing and selling an innovative new popcorn popper. The decision they face is the typical "Make or Buy" decision often faced by manufacturers. On one hand, EastBend could produce the popcorn popper itself, subcontracting different subassemblies, such as the heating element or the housing. Cost estimates in this case are as follows: Alternative: Make Popcorn Popper Cost per Unit $ $35.00 $42.50 $45.00 $49.00 Chance % 25% 25% 37% 13% On the other hand, the company could have the entire machine made by a subcontractor. The subcontractor, however faces similar uncertainties regarding the costs and has provided EastBend Corporation with the following schedule of costs and chances. Alternative: Buy Popcorn Popper Cost per Unit S37.00 $43.00 $46.00 $50.00 Chance % 10% 40% 30% 20% If EastBend Corporation wants to minimize its expected cost of production, should it make or buy? Construct cumulative risk profiles to support your recommendation.Explanation / Answer
Alternative : Make popcorn popper Cost Per unit $ Chance % Expected Cost per unit $= cost /unit*chance 35.00 25% 8.75 42.50 25% 10.63 45.00 37% 16.65 49.00 13% 6.37 Total 42.40 So Expected cost per unit to Make= $ 42.40 Alternative : Buy popcorn popper Cost Per unit $ Chance % Expected Cost per unit $= cost /unit*chance 37.00 10% 3.70 43.00 40% 17.20 46.00 30% 13.80 50.00 20% 10.00 Total 44.70 So Expected cost per unit to Make= $ 44.70 So East Bend should make as it costs less than buying.
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