Television Ltd was approached by a hotel to give a quotation for the maintenance of 100 colour TV-sets. The management of the company must now decide how they will do the maintenance of these sets. Television Ltd currently has idle capacity and can undertake the maintenance of the 100 sets by using own labour and parts. Management knows from experience with similar jobs that if only a few problems are encountered, the company's technicians can do the job for an amount of N$8 000. The probability of only encountering a few problems is 0,2. However, if more problems are encountered, the maintenance cost is expected to increase to N$18 000. Television Ltd sometimes uses subcontractors to assist them with maintenance. Subcontractor A has quoted a fixed price of N$17 000, which includes labour and parts, to service the 100 television sets. For an amount of N$15 000, Subcontractor B will supply the necessary parts. He will service the first 100 calls free of charge and all calls thereafter at a cost of N$40 per call. The number of calls is expected to be as follows: Number of calls 100 150 200 Probability 0,5 0,4 0,1

Television Ltd was approached by a hotel to give a quotation for the maintenance of 100 colour TV-sets. The management of the company must now decide how they will do the maintenance of these sets. Television Ltd currently has idle capacity and can undertake the maintenance of the 100 sets by using own labour and parts. Management knows from experience with similar jobs that if only a few problems are encountered, the company's technicians can do the job for an amount of N$8 000. The probability of only encountering a few problems is 0,2. However, if more problems are encountered, the maintenance cost is expected to increase to N$18 000. Television Ltd sometimes uses subcontractors to assist them with maintenance. Subcontractor A has quoted a fixed price of N$17 000, which includes labour and parts, to service the 100 television sets. For an amount of N$15 000, Subcontractor B will supply the necessary parts. He will service the first 100 calls free of charge and all calls thereafter at a cost of N$40 per call. The number of calls is expected to be as follows: Number of calls 100 150 200 Probability 0,5 0,4 0,1

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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