Read the following question carefully, and answer what the question is asking for: "What", "When",

"Why", "How Many" and provide examples where required.

Your company has asked you to evaluate the risks of building 6000 firmware (SW/HW) units rather than purchasing them from a vendor at $66.50 per unit. Your company has the skills and capacity to build 6000 units. The SW/HW engineers estimate the build costs at:

1) One-time setup cost of $50,000; and

2) Production cost of $60/unit. The test/quality assurance personnel inform you that a percentage of the units may be defective as shown below:

% defective 0% 1% 2% 3% 4%

% probability 40% 30% 20% 6% 4% of occurrence

The engineers estimate the costs to remove, repair, replace, and re-test defective units at $145/defective unit. However, 100% of units purchased from vendors are guaranteed to be defect-free.

Which option would you recommend and what is the basis for the recommendation?