Question

All defective parts must be removed and repaired at a cost of $120 per part. 1. Using expected value, is it economically better to make or buy the component

Answer 1

Yes repair work is better than purchase of new equipment.

Step-by-step explanation:

The cost of purchase and manufacturing new component is higher than the expected value of the repair cost. The repair cost is $120 which is added in the total cost of component. The manufacturing cost of the component is much higher than damage repair cost. The company should choose to repairing the component rather than buying or making a new one as it is economically better.