Determine expected profit for each machine

Reference no: EM131815429

Question: 1. ABC Machining needs to purchase a new machine to grow the business. The basic model is slower, slightly less precision quality but costs less, while the advanced model is faster, higher quality precision but costs more. Profitability will depend on future demand and the machine you select for the future of the business. The following table presents an estimate of profits over the next three years for each machine model.

Expected Profits for the Next 3 Years for Each Machine

Machine Alternatives

Low Cost Machine

Low Quality Technology

Medium Cost Machine

Medium Quality Technology

High Cost Machine

High Quality Technology

Basic model (A, B or C)

$80,000

$100,000

$150,000

Advanced model (D, E or F)

$40,000

$110,000

$220,000

You have customers that ask for both high and low quality work. Given the uncertainty associated with the demand volume, and no other information to work with, which machine would you select (machine A, B, C, D, E or F)? Explain your reasoning, justification and risks both positive and negative.

2. Write at least 350 words. Please cite your sources using proper APA 6th edition formatting.

Reference no: EM131815429

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