JDI, Inc is trying to decide whether to make or buy a part (#J-45FPT). Purchasing the part would cost $1.50 each. If they design and produce it themselves, it will result in a per unit cost of $0.75. However, the design investment would be $50,000
Further, they realize that for this type of part, there is a 30% chance that the part will need to be redesigned at an additional cost of $50,000. Regardless of whether they make or buy the part, JDI will need 100,000 of these parts. Using decision trees analysis and EMV, what should JDI do? Show the decision tree.
Since the expected values represent costs, JDI should select the lowest expected value, and make the part. Its expected monetary value (cost) is $140,000 versus $150,000 for the buy decision.
You might also like to view...
Teller Inc reported an allowance for doubtful accounts of $30,000 (credit) at December 31 . 2013 . before performing an aging of accounts receivable. As a result of the aging, Teller Inc determined that an estimated $52,000 of the December 31 . 2013 . accounts receivable would prove uncollectible. The adjusting entry required at December 31 . 2013 . would be
a. Doubtful Accounts Expense ........... 22,000 Allowance for Doubtful Accounts ... 22,000 b. Allowance for Doubtful Accounts ..... 22,000 Accounts Receivable ............... 22,000 c. Doubtful Accounts Expense ........... 52,000 Allowance for Doubtful Accounts ... 52,000 d. Allowance for Doubtful Accounts ..... 52,000 Doubtful Accounts Expense ......... 52,000
Testing and adjusting manufacturing equipment is an appraisal cost
Indicate whether the statement is true or false
For a web site, reinforcement refers to consistency between:
a. content and context b. communication and connection c. commerce and community d. customization, content, context, communication, connection, commerce, community e. none of the above
Which of the following involves a creditor beneficiary relationship?
a. A contract where the insured names a bank with which he has a loan as the beneficiary of a life insurance policy. b. A contract between an employer and a union representing the employees which is made for the benefit of the employees. c. A contract between the owner of a building and the contractor stating that the contractor will pay the contractor's employees at a stated rate. d. A contract between a governmental unit and business for services to be rendered to area citizens.