There are couple of responses posted below . Please read both of them and give your opinion on them separately.

Read Response-1 and Response-2 below and give your opinion on both responses separately. your answer should be supported with research unless the question is opinion oriented.. Responses to discussions below should not be “I agree” or “I like the way you stated that.” These responses should again be insightful, offering an opinion or facts based on your research and experiences. The opinion to both responses should be a minimum of 200 words each . See APA criteria for citing resources.

Read the case study “Teloxy Engineering (A)” on page 948 and answer the corresponding questions on the same page.

Response-1

By using the expected value, in my opinion, it is better to buy the components then make them. Given below, is my explanation for it.

 Material cost per unit 40 40 40 40 40 Defective unit replacement 120 120 120 120 120 Number of units 10000 10000 10000 10000 10000 Defect % 0% 10% 20% 30% 40% Probability of occurrence 10% 20% 30% 25% 15% Total material cost \$400000 \$400000 \$400000 \$400000 \$400000 One-time charge \$100000 \$100000 \$100000 \$100000 \$100000 Number of defective units 0 1000 2000 3000 4000 Cost of defective units 0 \$120000 \$240000 \$360000 \$480000 Replacement cost of units \$500000 \$620000 \$740000 \$860000 \$980000 Probability of the cost \$50000 \$124000 \$222000 \$215000 \$147000 Expected value to manufacture: \$758000.

Here, the expected value is the sum of the probability of the costs to produce the components. Therefore, the expected value is \$50000 + \$124000 + \$222000 + \$215000 + \$147000 = \$758000. The cost of purchase guarantee for components without defects, for 10000 components at \$72 per component, would be 10000 * \$72 = \$720000.

From the above values, it is easily distinguishable to see that the guaranteed purchase price for components without defects is lower than the probability costs to production costs. The difference in price is \$758000 – \$720000 = \$38000. Therefore, it is much more economical to purchase the components than to produce them.

2. Strategically thinking, why might management opt for other than the most economical choice?

Strategically thinking, on a long term and a much larger scale, the company would view producing the components themselves as more economical. The company would be taking into consideration factors like manufacturing costs, resources, real estate, taxes, production timelines, ROI, import costs, vendor commissions, import taxes, delays, insurance, packaging, reliability on vendor/manufacturer, transportation, flexibility, customization, supply chain availability, competition, technology, expansion, etc. If the company weighs the advantages of manufacturing the product on their own to purchasing the product from a manufacturer, against the above-mentioned factors, they could come to a conclusion as to what method would be more financially viable to them.

References:

Kerzner. (2000). Project management: A systems approach to planning, scheduling, and controlling. Hoboken, NJ: John Wiley & Sons.

Dr. Hans-Jorg Kutschera, Dr. Peter Hochranier, Drik Schneider, Philippe Thommes, Aug 7, 2017. The new make-or-buy question: Strategic decisions in a time of technology, product, and commercial disruptions. Strategy&, Part of the PwC Network.

Response-2

1. If a company got any contract to design and build a new product, then it should consider all the components required for it and relevant costs incurred to build that product (Park, 2018). With the discussion in the case study about the new contract.

The units are 10,000

For one element cost will be \$60

Here the entire cost for whole 10,000 units will be 60 X 10,000 = 600000\$

Addition material price will be 50000\$

That means what managemenet expected will be 50000\$+600000\$

Which comes down to total of 650000\$.

If the product is supposed to purchase the calculation will be as following 10000*72 = 720000\$.

Which is more than the price estimated for making which is of 650000\$.

If the product is made for the very first time then the defective possibility arises such as

= (0*0.1) + (1000*0.2) + (2000*0.3) + (3000*0.25) + (4000*0.15)

0+200+600+750+600 = 2150 will be approximate defective units

Repair for these defective will eb 120\$ per unit

Which will be total of 120\$ X 2150 = 258000\$

The total will be 500000\$ + 258000\$= 758000\$.

There is a variation of 758000\$ – 720000\$ = 38,000

Hence I would say that buying is a good option than to prefer making

2.As per the discussion in the case study the teloxy engineering finally decided to buy components from the market rather than manufacturing. If this project succeeds then they may not dependent on others for future components. As of now it is better to buy components from outside as they are new to it (Kerzner, 2019).

References:

Kerzner, H. (2019). Using the project management maturity model: strategic planning for project management. Wiley

Park, W. Y. (2018). Managing hazards of the make-buy decision in the face of radical technological change. Industrial Management & Data Systems, 118(7),