Dusty Is Evaluating Two Bids to Supply Fence Hardware for the 5

question 35

Multiple Choice

Dusty is evaluating two bids to supply fence hardware for the 5 acres of pasture that need to be fenced. Breezy submits a bid of $40 per unit with a defect rate of 3%; Lady's bid is $50 per unit and their product manager estimates the defect rate to be around 0.5%. If a section of fence fails, it costs an average of $500 in losses and herding costs to round up all of the capybaras (giant rodents from South America - their leather makes fine gloves) . Dusty believes it will take 500 units to fence in this pasture configuration. The product manager's uncertainty has Dusty concerned; what defect rate for Lady would make Dusty indifferent between the two suppliers as far as total cost is concerned?

• A)1%
• B)0.5%
• C)0.33%
• D)0%

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