Buy P 1-P Low Cost High Cost Purchase Cost C1 = 35,000+ 0.08 x 2,500,000 C2 = 35,000+ 0.12 x 2,500,000 C3 = 200,000 An organization requires 2.5 million pieces of a specific component. The firm can attempt to make it internally (design and manufacture) or purchase it externallyMAKEBased on relative frequency analysis with similar components in the "make" decisions, the probability P of a part with a low cost C1 is 0.38. Otherwise, it will cost C2. Thelow cost C1 is 8 cents per unit, while the higher cost C2 is: 12 cents per unit. Both outcomes involve a fixed setup investment of $35,000.BUYif they purchase the part, the non-recoverble expenses and variable part costs total $200,000 on the latest vendor quote.The procurement team must decide between the two decision alternatives. To provide management greater insight, determine the difference between the expected value ofMake and Purchase cost decision alternatives (Make minus Buy) instead of just rendering a Make or Buy final decision Round your answer to the nearest dollar, ifapplicable Do not enter the $ symbolMakeBuyLow CostHigh CostPurchase CostC1 =35,000+ 0.08 x 2,500,000C2=35,000+ 0.12 x 2,500,000C3-200,000

Given in the question: Number of units required = 2.5 Million Cost making equation under low cost…

The procurement team must decide between the two decision alternatives To provide management greater insight, determine the difference between the expected value of Make and Purchase cost decision alternatives (Make minus Buy) instead of just rendering a Make or Buy final decision. Round your answer to the nearest dollar, it applicable Do not enter the $ symbol

The procurement team must decide between the two decision alternatives To provide management greater insight, determine the difference between the expected value of Make and Purchase cost decision alternatives (Make minus Buy) instead of just rendering a Make or Buy final decision. Round your answer to the nearest dollar, it applicable Do not enter the $ symbol

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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