JDI, Inc Is Trying to Decide Whether to Make-Or-Buy a Part

question 109

Essay

JDI, Inc. is trying to decide whether to make-or-buy a part (#J-45FPT). Purchasing the part would cost them $1.50 each. If they design and produce it themselves, it will result in a per unit cost of $0.75. However, the design investment would be $50,000. Further, they realize that for this type of part, there is a 30% chance that the part will need to be redesigned at an additional cost of $50,000. Regardless of whether they make-or-buy the part, JDI will need 100,000 of these parts. Using decision trees analysis and EMV, what should JDI do?
Show the decision tree.

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Definitions:

Career Plan

A strategic outline of one's professional goals and the steps needed to achieve them, including education, skill development, and job experiences.

Occupation

A person's regular work or profession; job or principal activity.

Primary Category

The main or first-level classification used in sorting and organizing data, objects, or concepts.

Diversity

The inclusion of individuals with a variety of characteristics, such as race, gender, age, religion, cultural background, and more, within a group or organization.