Homework Help is Here – Start Your Trial Now!
Business
Accounting
Total Cost incurred if the company "fails after re- evaluating the making process"

Total Cost incurred if the company "fails after re- evaluating the making process"

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

Answer all sub part questions, please.

Samsung operations manager must determine whether to make or buy a new "heartrate sensor" for its new Galaxy smart watch it's about to produce. One million units are expected to be produced over the life cycle. If the product is made, a start-up cost of $420,000 & a manufacturing cost of $2/sensor. There's a probability of 4 that the product will be satisfactory and a .6 probability that it will not. If the product is not satisfactory, the firm will have to reevaluate the decision. If the decision is reevaluated, the choice will be whether to spend another $500,000 to redesign the sensor or to purchase. Likelihood of success the second time that the make decision is made is .9. If the second make decision also fails, the firm must purchase. Regardless of when the purchase takes place, Samsung's best judgment of cost is that it will pay $.50 for each purchased sensor plus $720,000 in vendor development cost. Total Cost incurred if the company "fails after re- evaluaring the making process" * O $2,140,000 O $4,140,000 $2,104,000 O $1,140,000
Transcribed Image Text:Samsung operations manager must determine whether to make or buy a new "heartrate sensor" for its new Galaxy smart watch it's about to produce. One million units are expected to be produced over the life cycle. If the product is made, a start-up cost of $420,000 & a manufacturing cost of $2/sensor. There's a probability of 4 that the product will be satisfactory and a .6 probability that it will not. If the product is not satisfactory, the firm will have to reevaluate the decision. If the decision is reevaluated, the choice will be whether to spend another $500,000 to redesign the sensor or to purchase. Likelihood of success the second time that the make decision is made is .9. If the second make decision also fails, the firm must purchase. Regardless of when the purchase takes place, Samsung's best judgment of cost is that it will pay $.50 for each purchased sensor plus $720,000 in vendor development cost. Total Cost incurred if the company "fails after re- evaluaring the making process" * O $2,140,000 O $4,140,000 $2,104,000 O $1,140,000
"Total Manufacturing Cost" is * $2,000,000 $3,280,875 O $1,808,775 O $2,787,875 Total Cost incurred if the company "succeeds after re-evaluating the making process" * $2,920,000 $7,593,755 $675,375.5 O $2,902,000
Transcribed Image Text:"Total Manufacturing Cost" is * $2,000,000 $3,280,875 O $1,808,775 O $2,787,875 Total Cost incurred if the company "succeeds after re-evaluating the making process" * $2,920,000 $7,593,755 $675,375.5 O $2,902,000
Expert Solution
steps

Step by step

Solved in 3 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Risk and Return
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS