Tyson Manufacturing (A Maker of Industrial Products) Is Interested in Marketing

question 65

Essay

Tyson Manufacturing (a maker of industrial products) is interested in marketing a new product. The company must decide whether to manufacture this product essentially on its own or employ a subcontractor to manufacture it. Below are two tables that represent the information related to the estimated probability distribution of the cost of one unit of this product under each alternative.
Cost under "Make" alternative. Cost under "Buy" alternative. Assuming that Tyson seeks to minimize the expected unit cost of manufacturing of buying the new product, should the company make the new product or buy it from a subcontractor? Show your work.

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Definitions:

Fiscal Policy

A government's strategy in managing its taxes and spending to influence the nation's economy.

Nondiscretionary

Relating to expenditure or investment decisions bound by specific rules or criteria, not subject to personal judgment or preference.

Political Negotiations

The process whereby representatives of groups or states with differing interests meet to discuss and attempt to resolve conflicts by reaching agreements.

Federal Reserve

The central banking system of the United States, responsible for setting monetary policy, regulating banks, and seeking to ensure financial stability.