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Regardless of whether they make-or-buy the part, DMR will need 100,000 of these parts. Using decision trees analysis and EMV, what should DMR do?

Regardless of whether they make-or-buy the part, DMR will need 100,000 of these parts. Using decision trees analysis and EMV, what should DMR do?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Using decision trees analysis and EMV, what should DMR do?

Problem #2 DMR, Inc. is trying to decide whether to make-or-buy a part (PN14344AR). Purchasing the part would cost them Php 15.00 each. If they design and produce it themselves, it will'result in a per unit cost of Php 7.50. However, the design investment would be Php 500,000. 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 Php 500,000. Regardless of whether they make-or-buy the part, DMR will need 100,000 of these parts. Using decision trees analysis and EMV, what should DMR do?
Transcribed Image Text:Problem #2 DMR, Inc. is trying to decide whether to make-or-buy a part (PN14344AR). Purchasing the part would cost them Php 15.00 each. If they design and produce it themselves, it will'result in a per unit cost of Php 7.50. However, the design investment would be Php 500,000. 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 Php 500,000. Regardless of whether they make-or-buy the part, DMR will need 100,000 of these parts. Using decision trees analysis and EMV, what should DMR do?
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