What is the company best choice


Tri-products is trying to decide whether to make or to buy an accessory item for one of its products. It is projected that this item will sell for $10 each. If the item is outsourced, there is virtually no cost other than the $6 per unit that the company would pay its supplier. Internally, there are two choices. Process A requires an investment of $120,000 for design and equipment, but results in a $4 per unit cost. Process B requires only a $100,000 investment, but its per-unit cost is $5. Regardless of whether the item is subcontracted or produced internally, there is a 50% chance that 50,000 units will be sold, and a 50% chance that 100,000 units will be sold. Using decision trees and EMV, what is the company's best choice? You do not have to show the decision tree.

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Business Management: What is the company best choice
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