Using the Case study provided write an 800-word limit in APA format, citations, and referencesTELOXY ENGINEERING (A)Teloxy Engineering has received a one-time contract to design and build 10,000 units of a new product. During the proposalprocess, management felt that the new product could be designed and manufactured at a low cost. One of the ingredientsnecessary to build the product was a small component that could be purchased for $60 in the marketplace, including quantitydiscounts. 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-gradethe component that sells for $72 with quantity discounts. The new price is substantially higher than you had budgeted for. This willcreate a cost overrun.You meet with your manufacturing team to see if they can manufacture the component at a cheaper price than buying it fromthe outside. Your manufacturing team informs you that they can produce a maximum of 10,000 units, just enough to fulfill yourcontract. The setup cost will be $100,000 and the raw material cost is $40 per component. Since Teloxy has nevermanufactured this product before, manufacturing expects the following defects:All 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?

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