A Component Must Have Reliability of

question 98

Essay

A component must have reliability of .999. Two technologies are available for this component: one produces a component with .999 reliability at a cost of $3000. Another produces a component with .75 reliability at a cost of $500. Which is cheaper: one high quality component or a parallel set of inferior components?

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Definitions:

Deferred Credit

Liabilities or income that have been recognized but not yet earned, and therefore, postponed to a future accounting period.

Contra Account

An account that is used to reduce the value of a related account on a financial statement and presents the net balance of both accounts.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset since it was put into use.

Anticipated Benefits

Anticipated benefits are the expected positive outcomes or gains that result from particular actions or investments.