Barbour Electric Is Considering the Introduction of a New Product

question 25

Essay

Barbour Electric is considering the introduction of a new product.This product can be produced in one of several ways: (a)using the present assembly line at a cost of $25 per unit, (b)using the current assembly line after it has been overhauled (at a cost of $10,000)with a cost of $22 per unit; and (c)on an entirely new assembly line (costing $30,000)designed especially for the new product with a per unit cost of $20.Barbour is worried, however, about the impact of competition.If no competition occurs, they expect to sell 15,000 units the first year.With competition, the number of units sold is expected to drop to 9,000.At the moment, their best estimate is that there is a 40% chance of competition.They have decided to make their decision based on the first year sales.
(a)Develop the decision table (EMV).
(b)Develop a decision table (EOL).
(c)What should they do?

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Definitions:

Conditions Underhood

The environmental and operational conditions present in the area under a vehicle's hood, affecting engine and component performance.

Ram Air

Air forced into the engine or passenger compartment when a vehicle moves down a highway. Ram air effect is zero when the vehicle is stationary and increases with vehicle speed. Many truck heat exchangers rely on ram air effect.

Federal Legislation

Laws passed by the federal government of a country, which apply to all regions and citizens within that country.

Mobile Refrigerant

A substance used in mobile air conditioning systems, such as those in vehicles, to absorb and release heat, thus cooling the interior.