eloxy Engineering has received a onetime contract to design and build 10,000 units of a new product. During the proposal process, management felt that the new product could be designed and...



eloxy Engineering has received a onetime contract to design and build


10,000 units of a new product. During the proposal process, management felt that the new product could be designed and manufactured at a low cost. One of the ingredients necessary to build the product was a small component that could be purchased for $60 in the marketplace, including quantity discounts. Accordingly, management budgeted $650,000 for the purchasing and handling of 10,000 components plus scrap.During the design stage, your engineering team informs you that the final design will require a somewhat higher-grade component that sells for $72 with quantity discounts. The new price is substantially higher than you had budgeted for. You meet with your manufacturing team to see if it can manufacture the component at a cheaper price than buying it from the outside. Your manufacturing team informs you that it can produce a maximum of 10,000 units, just enough to fulfill your contract. The setup cost will be $100,000 and the raw material cost is $40 per component. Since Teloxy has never manufactured this product before, manufacturing expects the following defects:% defective010203040probability of occurrence (%)10,20,30,25,15All defective parts must be removed and repaired at a cost of $120 per part.Your manufacturing team informs you that it has found a way to increase the size of the manufacturing run from 10,000 to 18,000 units, in increments of 2,000 units. However, the setup cost will be $150,000, and defects will cost the same $120 for removal and repair.QUESTIONS -Calculate the economic feasibility of make or buy. in case B from (10,000 to 18,000 units, in increments of 2,000 units)


Dec 06, 2021
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