Ritz​ Products's materials​ manager, Tej​ Dhakar, must determine whether to make or buy a new semiconductor for the wrist TV that the firm is about to produce. One million units are expected to be produced over the life cycle. If the product is​ made, start-up and production costs of the make decision total ​$3 ​million, with a probability of 0.4 that the product will be satisfactory and a 0.6 probability that it will not. 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 ​$3 million to redesign the semiconductor or to purchase. Likelihood of success the second time that the make decision is made is 0.8. If the second make decision also​ fails, the firm must purchase. Regardless of when the purchase takes​ place, Dhakar's best judgment of cost is that Ritz will pay ​$0.40 for each purchased semiconductor plus ​$2 million in vendor development cost. Part 2 ​a) Assuming that Ritz must have the semiconductor​ (stopping or doing without is not a viable​ option), what is the best​ decision? The firm should................ he semiconductors because this decision has an expected cost of ​$enter your response here. ​(Enter your response as an integer​.)   b) What criteria did you use to make this​ decision? Note that we determined the expected monetary value for each decision in part​ (a). In this​ case, expected monetary value is represented by (expected revenue/  expected cost/ expected profit) . . To make the decision in part​ (a), we found the (minimum/ maximum) of these v alues.   c) What is the worst that can happen to Ritz as a result of this particular​ decision? What is the best that can​ happen? The worst that can happen is that the firm spends ​$enter your response here. The best that can happens is that the firm only spends $enter your response here. (Enter your responses as integers​.)

Practical Management Science
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ISBN:9781337406659
Author:WINSTON, Wayne L.
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Ritz​ Products's materials​ manager, Tej​ Dhakar, must determine whether to make or buy a new semiconductor for the wrist TV that the firm is about to produce. One million units are expected to be produced over the life cycle. If the product is​ made, start-up and production costs of the make decision total ​$3 ​million, with a probability of
0.4 that the product will be satisfactory and a 0.6 probability that it will not. 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 ​$3 million to redesign the semiconductor or to purchase. Likelihood of success the second time that the make decision is made is 0.8. If the second make decision also​ fails, the firm must purchase. Regardless of when the purchase takes​ place, Dhakar's best judgment of cost is that Ritz will pay ​$0.40 for each purchased semiconductor plus ​$2 million in vendor development cost.
Part 2
​a) Assuming that Ritz must have the semiconductor​ (stopping or doing without is not a viable​ option), what is the best​ decision?
The firm should................ he semiconductors because this decision has an expected cost of ​$enter your response here. ​(Enter your response as an integer​.)
 
b) What criteria did you use to make this​ decision?
Note that we determined the expected monetary value for each decision in part​ (a).
In this​ case, expected monetary value is represented by (expected revenue/  expected cost/ expected profit) . .
To make the decision in part​ (a), we found the (minimum/ maximum) of these v alues.
 
c) What is the worst that can happen to Ritz as a result of this particular​ decision? What is the best that can​ happen?
The worst that can happen is that the firm spends ​$enter your response here. The best that can happens is that the firm only spends $enter your response here. (Enter your responses as integers​.)
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