| A | number of units |
| B | cost/unit |
| C | defective unit replacement |
| D | defect % | | 25% | 35% | 40% |
| E | probability of defect occurring | | 60% | 20% | 10% |
| F | set-up charge |
| G | total material cost | A*B |
| H | expected # of defective units | A*D |
| J | cost of replacing defective units | C*H |
| K | cost of making and cost of replacing defective units | F+G+J |
| L | sunk cost | F |
| M | probability of cost for the defect level | E*K | | | | SUM ROW M | $ - |
| | | | | | | TOTAL OF SUMS | $ - |
| | | | | | | Expected value of making in-house |
| | Using expected value, make your recommendation to make or buy the Project VIM component part. |
| | Will you need to issue a change request for additional money on your project, and if so how much, and if not why not? |
| | What reasons do you think management might use to opt for the lesser economical choice? |
TROWELL1911
PJM530_Excel_Template_Critical_Thinking_Option_01_Module_01.xlsx
