Scenario: 500 units of a product are being manufactured and the question to be answered is whether or not to perform a particular test on those units before shipping. The test costs $10,000 per unit to perform. The cost not to perform the test is $0 per unit, but if a unit fails in the field then it will have to be fixed in the field, which has a cost of $350,000 per unit.
If the units are tested, for the units that pass the test, there is now an additional cost of re-readying the units for delivery of $2,000 per unit. For the units that fail the test, there is now an additional cost of $21,000 to fix the units, as well as the $2,000 per unit cost of re-readying them for delivery, for a $23,000 total cost per unit.
Historically you know and can count on the fact that 96% of your products will pass the testing. The same pass/fail rate for testing applies to the pass/fail rate observed in the field.
To fully complete this assignment, you need to answer or perform the following:
The math and resulting values you are expected to fill in to show the completion of the decision tree.
Be sure to fill in the last two values: what is the Expected Monetary Value for both performing the test and not performing the test?
Which choice should be made? Be sure to include with your submission an answer to whether the test should be performed or not, and give a short answer why.

Answers

Answer 1

Answer:

7000

Explanation:

Answer 2

The better choice is to not perform the test. This decision is based on the higher expected monetary value, indicating that not performing the test is more financially favorable in this scenario.

How did we arrive at this assertion?

To make an informed decision, we'll calculate the Expected Monetary Value (EMV) for both performing the test and not performing the test.

For performing the test:

EMV = (Probability of passing * (Revenue - Test Cost)) + (Probability of failing * (Revenue - Test Cost - Fixing Cost - Re-readying Cost))

EMV = (0.96 * ($350,000 - $10,000)) + (0.04 * (-$350,000 + $23,000))

For not performing the test:

EMV = (Probability of passing in field * Revenue) + (Probability of failing in field * Fixing Cost)

EMV = (0.96 * $350,000) + (0.04 * $350,000)

Now we'll calculate the values:

EMV for performing the test = (0.96 * $340,000) + (0.04 * -$327,000) = $326,400

EMV for not performing the test = (0.96 * $350,000) + (0.04 * $350,000) = $350,000

Based on the calculations, the EMV for not performing the test is higher ($350,000) than performing the test ($326,400).

Therefore, the better choice is to not perform the test. This decision is based on the higher expected monetary value, indicating that not performing the test is more financially favorable in this scenario.

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Related Questions

Pharoah Co began operations on July 1. It uses a perpetual inventory system. During July, the company had the following purchases
and sales
Purchases
Date
Units
Unit Cost
Sales Units
July
1
5140
July 11
>
$150
July 14
July 21
5161
July 27
(1)

Answers

Answer:

july 1 5140 this os the answer

9. The manager of a fast food franchise will establish
hamburgers to cook each hour.
A. tactical strategies
B. tactical plans
C. operational plans
D. strategic plans


10. Companies with centralized Anthority systems typically requires multiple layers of management and have Organizational structures.

A. Tall
B. Flexible
C. Broad
D. Flat

Answers

Answer:

I think answer this onlyOrganizational

Answer:

C, A

Explanation:

9. Operaional plans

10. Tall

Please select the economic term that is best described by each statement below. There are limited resources to satisfy all of society's wants. recession margins scarcity business cycle trade-off entrepreneurship

Answers

The given 'economic terms' are correctly matched with their descriptions as follows:

1). There are limited resources to satisfy all of society's wants. - Scarcity

2). Comparison of the benefits and costs of engaging in an activity. - Trade-off

'Economy' is characterized as the domain that 'studies the production of goods with limited resources, its distribution across the distinct regions, and its consumption by the individuals.'In the economic context, 'scarcity' is defined as the situation that arises due to the limited available resources for producing goods while having unlimited demand for them. While 'trade-off' stands for the situation in which 'the benefit caused by one good is given up or decreased for buying another good or take its benefits.' Thus, it aims to establish a balance among the benefits, as well as, price of the two. Hence, they would be matched as shown above.

Explanation:

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How is economics a science?

Answers

Answer:

Economics is the scientific study of the ownership, use, and exchange of scarce resources – often shortened to the science of scarcity. Economics is regarded as a social science because it uses scientific methods to build theories that can help explain the behaviour of individuals, groups and organisations.

Nhận định: Người đại diện theo pháp luật của doanh nghiệp phải cư trú tại Việt Nam đúng hay sai?

Answers

Answer:

Xin hỏi người đại diện theo pháp luật của công ty tô icó bắt buộc cư trú tại Việt Nam hay không? Trả lời: Công ty Luật TNHH SB LAW cảm ơn bạn đã quan tâm đến ...

which one of the following alternatives reprsents a source of stress in the work place?
A) Absence from work
B) alcohol or other substance abuse
C) conflict
D) complex raskss

Answers

Answer:

option a

Explanation:

absence from work is a stress because we should to do the two days work

Team members who have the right set of skills needed to get the job done are demonstrating what ?

Answers

Team members who have the right set of skills needed to get the job done are demonstrating competency.

Competency refers to the ability to get things done. In other words, when someone can do a particular thing/work efficiently, then he/she is demonstrating competency.

Competency is a necessary skill for any person hoping or desirous of working in a company.Moreover, working in teams is one aspect of a business or corporate working environment.And in this aspect, if a person exhibits all the right set of skills that are required to do the job right, he or she is displaying a competent nature. In other words, we can say that the person possesses the ability to get things done in an efficient manner.

Thus, when a person exhibits all the required skills to finish a job, that too efficiently, then that person is said to be demonstrating competency. This means that the person possesses all the necessary skills and expertise that the work or job requires.

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sơ đồ nhân sự của nhà hàng

Answers

Answer:

Science

Explanation:

Multiple choice Questions about the statement u write

What is Operation Management?
Explain objectives of Operation Management.

Answers

Answer:

The goal of operations management is to maximize efficiency while producing goods and services that effectively fulfill customer needs. ... Operations decisions include decisions that are strategic in nature, meaning that they have long-term consequences and often involve a great deal of expense and resource commitments.

importance of prospectus​

Answers

Explanation:

The prospectus provides a reliable place for investors to track down the various fees that are attached to owning shares of the fund, such as the amount of the management fee.

Name any FIVE diversity issues that affect the farm manufacturing​

Answers

Answer:

not be dismissed against any manufacturer because of market-share liability

Select the statement below that best defines prepaid accounts. Multiple choice question. Prepaid accounts reflect a company's cash balance and include currency, coins and money orders. Prepaid accounts are liabilities that are due within a specified time period. Prepaid accounts are expenses and are increased with a credit. Prepaid accounts are assets that represent prepayments of future expenses.

Answers

The statement related to the prepaid account " It is the asset that shows advance payment for the future expense" is correct.

The information related to the prepaid account is as follows:

It is the account that shows in the current asset side of the balance sheet.It is an advance payment for future expenses.It contains the normal debit balance.Neither it is a liability nor an expense account.

Therefore we can conclude that The statement related to the prepaid account " It is the asset that shows advance payment for the future expense" is correct.

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You have been hired as a consultant to Freedom Inc. a consumer-focused financial institution intending to enter the Ghanaian market. Critically analyse what factors you shall consider in advising Freedom Inc. on how it should set its lending interest rates, accounts commissions, fees & charges

Answers

Everywhere in the world the lending rates, account commissions, fees, and charges that financial institutions fix are determined chiefly by two factors:

The rules, policies, regulations, and rates of the Central Bank; and the market position of the competition.

a.  

Central Banks or the Federal Reserve Bank (as it is called in the United States of  America are the chief administrators of interest rates. This is no different in Ghana. By policy, the Central Bank fixes what is referred to as discount rates. When commercial banks in Ghana go to the Central Bank to borrow funds, it usually comes at a particular interest rate known as the discount rate. Commercial banks, in turn, lend these funds to their customers at a rate that is higher but NOT LOWER than the Federal Reserve Bank's discount rate. Banks make a profit when they take up these funds at a lower rate than the Federal Reserve Bank and lend it to customers at a higher rate. Banks also borrow funds from customer deposits. They borrow from these deposits and give loans to other customers. They also turn a profit when the rate at which they borrow from customer deposits is higher than the rate at which such funds are paid back to them by the borrowers. This net difference (profit to the bank) is called Net Interest Margin. Therefore, in setting lending rates, the discount rate of the Central Bank must be factored into consideration.

b.

So banks can arbitrarily charge any rate above the central bank's discount rates, that they can lend funds to consumers. However, they must take into consideration the actions of other banks. If other banks are giving out loans are a 5% margin above the Central Bank's discount rate, to fix a higher margin may translate to not being able to get customers at all to take up their loans.

c.

Commercial banks must also take into consideration the Central Banks reserve requirements.

In simple terms, Reserve Requirements is the mandatory percentage of its cash that a commercial bank or financial institution must keep with the Federal Reserve Bank.  

This requirement and the discount rate are collectively called Monetary Policy tools. The higher the reserve, the lower the amount of cash available for lending by the financial institution.

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Your company needs to cut costs. As the VP of Operations you have been tasked with cutting a middle management position from one of four areas (A, B, C, D, E) which will increase the span of management for the remaining managers in that area. Each area has four managers. Which area would be the best place to cut a manager

Answers

mkekeje

bsbshdhususuhsbsbd

Area C has the lowest span of management, with 3 subordinates per manager, so it would be the best place to cut a manager.

Your company needs to cut costs. As the VP of Operations, you have been tasked with cutting a middle management position from one of four areas (A, B, C, D, E) which will increase the span of management for the remaining managers in that area.

The best area to cut a manager would be the area with the lowest span of management. This means that the area with the fewest subordinates per manager.

The lower the span of management, the less impact the loss of one manager will have on the overall productivity of the area.

To determine which area has the lowest span of management, we can calculate the span of management for each area.

The span of management is calculated by dividing the number of subordinates by the number of managers. So, for example, if an area has 16 subordinates and 4 managers, the span of management would be 4.

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A systems analysis includes a ________ that is used to determine whether the solution is achievable from a financial, technical, and organizational standpoint.

Answers

The feasible study should be applied for measuring whether the solution should be accomplished from the financial, technical & organizational viewpoint.

The following information related to the system analysis is:

It is the process where an individual studies the system so that the information system could be analyzed & evaluated. The projects related to the system analysis should be started for three types of reasons i.e. issues, opportunities & directions.

Therefore we can conclude that The feasible study should be applied for measuring whether the solution should be accomplished from the financial, technical & organizational viewpoint.

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Using the following information: The bank statement balance is $5,086. The cash account balance is $5,263. Outstanding checks amounted to $894. Deposits in transit are $1,007. The bank service charge is $55. A check for $51 for supplies was recorded as $42 in the ledger. Prepare a bank reconciliation for Candace Co. for May 31.

Answers

Answer:

Bank statement Balance = $5086

Cash Account Balance = $5263

Outstanding Checks. = $894

Deposit In Transit. = $1007

Bank Service Charge. = $55

A Check. = $51

Check For Supplies. = $42

Adjusted Cash Balance. = $12398

Identity three areas in our daily lives that would benefit from the study of communication Use specific examples from the site.

Answers

Answer:

school

private

University

What are new guidelines issued by GAAP for consolidating entities

Answers

Consolidation Rules Under GAAP

The general rule requires consolidation of financial statements when one company’s ownership interest in a business provides it with A MAJORITY OF the voting power- meaning it controls more then 50% of the voting shares

How legislation can lead to the success and failure of a company​

Answers

The principle difference between a personal liability company and a private company is that directors of a personal liability company, as well as previous directors, can be held responsible for the debts of the company. However, the owner of a personal liability company is considered separate from the company.

Letang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System A costs $270,000, has a four-year life, and requires $77,000 in pretax annual operating costs. System B costs $350,000, has a six-year life, and requires $71,000 in pretax annual operating costs. Suppose the company always needs a conveyor belt system; when one wears out, it must be replaced. Assume the tax rate is 21 percent and the discount rate is 8 percent. Calculate the EAC for both conveyor belt systems. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Which conveyor belt system should the firm choose

Answers

Answer:

System B

Explanation:

Both projects only have costs associated with them, not sales, so we will use these to calculate the NPV of each project. Using the tax shield approach to calculate the OCF, the NPV of System A is:

OCFA = −$76,000(1 − .35) + .35($244,000 / 4)

OCFA = −$28,050.00

NPVA = −$244,000 − $28,050.00(PVIFA10%,4)

NPVA = −$332,914.73

And the NPV of System B is:

OCFB = −$70,000(1 − .35) + .35($342,000 / 6)

OCFB = −$25,550.00

NPVB = −$342,000 − $25,550.00(PVIFA10%,6)

NPVB = −$453,276.91

If the equipment will be replaced at the end of its useful life, the correct capital budgeting technique is EAC. Using the above NPVs, the EAC for each system is:

EACA = -$332,914.73 / (PVIFA10%,4)

EACA = -$105,024.88

EACB = - $453,276.91 / (PVIFA10%,6)

EACB = -$104,075.72

If the conveyor belt system will be continually replaced, we should choose System B since it has the more positive EAC.

In CengageNOWv2, you may move, re-size, and rearrange panels in those assignments that use multiple panels.
A. True
B. False

Answers

The CengageNOWv2 is an online educational tool that offers more control over time and generates better performance for children.

It is an integrated learning management system that allows you to access your tasks, resources, and grades 24/7.Users may study at their speed with online learning methods or within a timetable given by the instructor.It is used to display the use of several panels that could be moved, resized, and arranged.

That's why the final answer is "Option A".

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In Cuba, a bureaucratic committee makes the production decisions for the country's firms and factories. Therefore, Cuba is an example of a: _________.
A. centralized economy.
B. capitalist economy.
C mixed economy.
D. pure free-market economy.

Answers

Answer:

A

Explanation:

This is because in a centrally planned economy, a central bureaucracy makes all decision concerning what to produce, how to produce it, how much to produce and who gets it.. The government owns land, capital and in a sense; as well as labor.

What do you mean by veterinarian ? write his/her works

Answers

Answer:

A veterinarian is a medical professional who protects the health and well-being of both animals and people. They diagnose and control animal diseases and treat sick and injured animals. They also advise owners on proper care of their pets and livestock.

Why is international employment important? How does it help for economic development of the country? classify​

Answers

Explanation:

Going from one country to another country for job and to earn money is called foreign employment. People of Nepal go to different countries of the world for jobs and earn.

The important of foreign employment are :

Country can get lots of foreign currency as the remittance which can be establish industries in the country. Foreign employment reduces the unemployment problem of a country.

I hop it will help you so.

Decide if each would be considered an annuity or not an annuity. a. $1000 cash received in year 1 then $1200 cash received in year 2 then $1500 cash received in year 3 b. $200 paid each month for 12 months

Answers

Sorry I don’t get it??

An isocost line reveals the Group of answer choices input combinations that can be purchased with a given outlay of funds. output combinations that can be produced with a given outlay of funds. costs of inputs needed to produce along an expansion path. costs of inputs needed to produce along an isoquant.

Answers

Answer:

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Americans spend the largest portion of their budget on
a. entertainment
b. housing
c. transportation
d. food
Please select the best answer from the choices provided
Ο Α
ОВ
OD

Answers

B Answer

American spending larges portion in housing to live in rent are very high of living each each year up up 3 present of rent.

which of the following statements about professionalism is true ​

Answers

Answer:

Where are the questions????

STION 2: HUMAN RIGHTS Read the scenario below and answer the questions that follow MOKAKIOA CONSTRUCTIONS LIMITED (MCL) Mokakioa Constructions Limited is a large company that has hired many employee ensures that there is an open communication channel between senior managem employees Employees are allowed to join a trade union of their choice. 2 11 Identify TWO human rights that MCL promotes Motivate your answer by quoting from the scenario above ​

Answers

The company's decision to allow "open communication channel between senior management employees" and "join a trade union of their choice" promotes the two human rights of freedom to express and freedom to make choices.

Human rights are the basic rights that everyone has and can assert to prevent oneself from discrimination. The rights may differ from place to place, depending on the circumstances involved.

Human rights in the workplace refer to the rights of workers. Such rights may include the right to freedom of expression, right to strike against bad working conditions, right to equal pay, right against sexual harassment, or be it right religious freedom, among others. In the case of Mokakioa Constructions Limited (MCL), the employees are given two basic human rights through the "open communication channel" and freedom "to join a trade union of their choice". By giving their workers the right to do these two, the company ensures that the workers are given the freedom to do what works best for them and not make them act against their will.

Human rights at the workplace cover a series of rights that workers have to ensure they are protected. And in that regard, MCL's open channel of communication and freedom to join a trade union of their choice promotes human rights.

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Suppose the supply of apples sharply increases because of perfect weather conditions throughout the growing season. Assuming no change in demand, explain the effect on the-equilibrium price and quantity of apples.

Answers

Answer:

A surplus.

Explanation:

Well its simple, first to explain what is the equilibrium price which is the price at which the quantity demanded equals the quantity supplied. It is determined by the intersection of the demand and supply curves. A surplus exists if the quantity of a good or service supplied exceeds the quantity demanded at the current price; it causes downward pressure on price which is exactly what is happening in this case.

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