On your first month as an employee at CVCB industries, your boss asked you to come up with alternatives (and evaluate) for producing a newly designed drill-bit on a turning machine.

Essentially, your boss has no information about what the alternatives are nor what criteria you should be using in evaluating the alternatives.

The same task was given to a previous employee before you (but she could not finish the analysis :( ) so she gave you the following information instead:

• An old turning machine valued at $350,000 exists (in the warehouse) that can be modified for the new drill bit. The in-house technicians have given an estimate of $40,000 to modify this machine, and they assure you that they will have the machine ready before the projected start date (although they have never done any modification of this type). It is hoped that the old turning machine will be able to meet the production requirements at full capacity.
• An outside company, Abesamis Inc. made the machine seven years ago and can easily do the same modifications for $60,000.
• The cooling system used for this machine is not environmentally safe and would require some disposal costs.
• Abesamis Inc. has offered to build a new turning machine with more environmental safeguards and higher capacity for a price of $450,000. Abesamis Inc. has promised this machine before the startup date and is willing to pay any late costs. Your company has $100,000 set aside for the start-up of the new product line of drill bits.

For this situation:

a) Define the problem. (5 pts)

b) List alternatives facing CVCB Industries. (5 pts)

c) Select a criterion for evaluation of alternatives. (5 pts)

d) Identify risks and non-monetary considerations that may impact your decisions. (5 pts)