a.

Define the problem:

The company's turning machine is old and needs modification.

b. List Key Assumptions:

*The old turning machine is not in full capacity for a new drill bit.
*Since the turning machine is old already, it is not updated or suitable for making new drill bit.
*The old turning machine is not environmentally safe

c. List alternatives facing Greenfield Industries:

Option 1. Modify the old turning machine through in-house technicians and pay $40,000. With the in-
house technicians, they have never done the modification of the type of turning machine Greenfield
has, so it is a risk.
Option 2. Modify the old turning machine through McDonald Inc. and pay $60,000. With the McDonald
Inc., the machine will be modified but would require disposal costs because of cooling system used.
Option 3. Build a new turning machine for a price of $450,000. In building a new turning machine, there
is no 100% assurance of the machine to be ready and costs $100,000 compare to the old one.

d. Select a criterion for evaluation of alternatives:

One criterion could be to have an economical, modified and environment-friendly turning machine, so
probably option 3

e. Introduce risk into this situation:

If McDonald Inc. have not built the new turning machine before the projected start date, Greenfield
Industries will be affected.

f. Discuss how non-monetary considerations may impact the selection:

The non-monetary considerations here in this problem are the ability of the prospected technicians on
the alternatives to finish and modify the turning machine before the projected date, and the experience
of the technicians o the type of modification of the machine.

g. Describe how a post-audit could be performed:

In calculations, option 1 with the in-house technicians is cheaper with the McDonald Inc in terms of
modification, only the expertise is the problem. While in building a new turning machine that will cost
$450,000, the company will need $100,000 more if they can sell the old one with $350,000, but will give
them full modifications.