Question1: Read the case study “Teloxy Engineering (A)”and answer the corresponding questions on the same page.(Atleast 300 words) TELOXY ENGINEERING (A) Teloxy Engineering has received a one-time con

Question1:

Read the case study “Teloxy Engineering (A)”and answer the corresponding questions on the same page.(Atleast 300 words)

TELOXY ENGINEERING (A)

Teloxy Engineering has received a one-time contract to design and build 10,000 units of a new product. During the proposal process, management felt that the new product could be designed and manufactured at a low cost. One of the ingredients necessary to build the product was asmall component that could be purchased for $60 in the marketplace, including quantity dis-counts. Accordingly, management budgeted $650,000 for the purchasing and handling of 10,000 components plus scrap. During the design stage, your engineering team informs you that the final design will require a somewhat higher-grade component that sells for $72 with quantity discounts. The new price is substantially higher than you had budgeted for. This will create a cost over run. You meet with your manufacturing team to see if they can manufacture the component at a cheaper price than buying it from the outside. Your manufacturing team informs you that they can produce a maximum of 10,000 units, just enough to fulfill your contract. The setup cost will be $100,000 and the raw material cost is $40 per component. Since Teloxy has never manu-factured this product before, manufacturing expects the following defects:Percent defective010203040Probability of1020302515occurrenceAll 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?2.Strategically thinking, why might management opt for other than the most economical choice?

TELOXY ENGINEERING (B)

Your manufacturing team informs you that they have found a way to increase the size of the manufacturing run from 10,000 to 18,000 units in increments of 2000 units. However, the setup cost will be $150,000 rather than $100,000 for all production runs greater than 10,000 units and defects will cost the same $120 for removal and repair.

1.Calculate the economic feasibility of make or buy.

2.Should the probability of defects change if we produce 18,000 units as opposed to10,000 units?

3.Would your answer to question 1 change if Teloxy management believes that follow-on contracts will be forthcoming? What would happen if the probability of defects changes to 15 percent, 25 percent, 40 percent, 15 percent, and 5 percent due to learning-curve efficiencies

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Question2:

Read the case study “Communication Failures” starting on page 329 and answer the questions on page 332.

—-CASE STUDY—

COMMUNICATION FAILURES1

Herb had been with the company for more than eight years and had worked

on various R&D and product enhancement projects for external clients. He

had a Ph.D. in engineering and had developed a reputation as a subject matter expert. Because

of his specialized skills, he worked by himself most of the time and interfaced with the various

project teams only during project team meetings. All of that was about to change.

Herb’s company had just won a two-year contract from one of its best customers. The

first year of the contract would be R&D and the second year would be manufacturing. The

company made the decision that the best person qualified to be the project manager was Herb

because of his knowledge of R&D and manufacturing. Unfortunately, Herb had never taken

any courses in project management, and because of his limited involvement with previous

project teams, there were risks in assigning him as the project manager. But management

believed he could do the job.

Herb’s team consisted of fourteen people, most of whom would be full

time for at least the first year of the project. The four people that Herb

would be interfacing with on a daily basis were Alice, Bob, Betty, and Frank.

? Alice was a seasoned veteran who worked with He…

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