# of blenders 10,000 variable cost / unit $2.5 purchase / unit $10 purchase motor cost $100,000 Make motor cost Stage 1 $30,000 Stage 2 $20,000 Success $105,000 Success $75,000 Stage 2 variable cost after Stage 2 $25,000 80% 60% Develop Stage 1 $110,000 No Success | $130,000 No Success | $150,000 Develop 20% 40% $110,000 Purchase $100,0005. ABC company is under contract to make 10,000 blenders. It must decide whether to make or buy the blender motor. Unfortunately, ABC does not presently have motor technology. Motor development is a two-stage process. The first stage has a 80% chance of success and will cost $30,000. The second stage has a 60% chance of success and will cost $20,000. If development is successful, then the variable cost of producing a motor will be $2.50/ motor. If either development stage is unsuccessful, ABC must purchase motors outside at a cost of $10/ motor. a) Should ABC purchase the motor outside or begin development? 0 What is the most ABC would pay to know, before making the first decision, whether the first stage would succeed? the second stage