If the second make decision also fails, the firm must purchase. Regardless of when the purchase takes place, Mr. Bruce's best judgment of cost is that Ritz will pay $0.5 for each purchased semiconductor plus $1 million in vendor development cost. 4 The amount of semiconductor needed was based

If the second make decision also fails, the firm must purchase. Regardless of when the purchase takes place, Mr. Bruce's best judgment of cost is that Ritz will pay $0.5 for each purchased semiconductor plus $1 million in vendor development cost. 4 The amount of semiconductor needed was based

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

If the product is not satisfactory, the firm will have to
reevaluate the decision. If the decision is reevaluated, the
choice will be whether to spend another $1 million to
redesign the semiconductor or to purchase. Likelihood of
success the second time that the make decision is made is
0.9.
If the second make decision also fails, the firm must
purchase.
Regardless of when the purchase takes place, Mr. Bruce's
best judgment of cost is that Ritz will pay $0.5 for each
purchased semiconductor plus $1 million in vendor
development cost.
4 The amount of semiconductor needed was based
on exponential smoothing technique, and the alpha was
chosen on what's called 'gut reactions and political
decision from the upper management'. What do you think
of this choice of technique ?

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