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Tri-Products is trying to decide whether to make or buy an accessory for one of its products. The following tables indicate the projected sale price

Tri-Products is trying to decide whether to make or buy an accessory for one of its products. The following tables indicate the projected sale price of said product together with the cost of the accessory if purchased (outsourced), which means that there really is no other cost per unit than that indicated in said table and which is would pay the supplier of said accessory. If it is produced internally, they have two possibilities: Process A, which would require an investment for the design and the purchase of equipment for a total cost and a cost per unit as indicated in the corresponding table. For its part, Process B requires only the investment costs and cost per unit that also appear in said table. Regardless of whether the accessory is manufactured or subcontracted, there are probabilities and levels of sales in units as indicated in the first table.

Sale Price

Cost

Outsourced

Ventas (unidades)

Hight Demand

(Prob. 50%)

Low

Demand (Prob. 50%)

$12

$8

120,000

60,000

Process

Investment

Cost

A

$130,000

$6/unit

B

$120,000

$7/unit

a) Construct an appropriate decision tree for the alternatives and outcomes presented. b) Determine the best strategy using the Expected Monetary Value (EMV).

Thanks for the help! Please legible and I will give a like :)

- I had a similar post but forgot to add the questions... for some reason I tried to do "edit" but it didn't work.

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