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Q. John Arellano Electronic Products' materials manager, Peter Bolla, must Conclude whether to make or buy a new semiconductor for the wrist TV which the industry is about to produce. One million units are expected to be produced over the life cycle. If the product is made, start-up also production costs of the make decision total $1 million with a probability of 0.4 which the product will be satisfactory also a 0.6 probability which it will not. If the product is not satisfactory, it will have to revaluate the decision. If the decision is revaluated, the choice will be whether to spend another $1 million to redesign the semiconductor or to purchase one. Likelihood of success the second time which the decision is made is 0.9. If the second make also fails, the industry must purchase. Regardless of when the purchase takes place, Peter's best judgment of cost is which John Arellano Electronic Products will pay $0.50 for each purchased semiconductor plus $1 million in vendor development cost.
a) Pretentious which John Arellano Electronic Products must have the semiconductor (stopping or doing without is not a viable option), illustrate what is the best condition?
b) Illustrate what criteria did you use to make this decision?
c) Illustrate what is the worst which can happen to the organization as a result of this particular decision? Illustrate what is the best which can happen?
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