Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 59

A total of 5000 mechanical subassemblies are needed annually on a final assembly line. The subassemblies can be obtained in one of three ways: (1) Make them in one of three plants owned by the company; (2) buy them off the shelf from the one and only manufacturer; or (3) contract to have them made to specifications by a vendor. The estimated annual equivalent cost for each alternative is dependent upon specific circumstances of the plant, producer, or contractor. The information shown details the circumstance, a probability of occurrence, and the estimated annual cost. Construct and solve a decision tree to determine the least-cost alternative to provide the subassemblies.