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You are a supplier of parcel shelves to a car manufacturer and have been asked to supply shelves for a new sports car.
You are a supplier of parcel shelves to a car manufacturer and have been asked to supply shelves for a new sports car. Traditionally you have made these from compressed fibres, resins and glue formed in a heated press. The cost per shelf unit is £20. Your customer has now requested that following technological advances in materials, you now produce the shelf out of plastic polymer for better sound insulation and increased resistance to breaking during collision. An alternative solution is that you are able to 'buy in' the shelf from another company owned by the organisation at a cost of £16
Fixed cost for Fibre & Resin Shelf ; Plastic Shelf is 100,000 and 340,000 respectively
Variable cost for Fibre & Resin Shelf ; Plastic Shelf is 10 and 4 respectively
Selling price is the same for both Shelves- 20 per unit
Internal Organisation Price is 16 per unit
a. Please answer the following:
(1) Break even amount of units for the fibre/resin shelf
(2) Break even amount of units for the plastic shelf
b. Let x be expressed as the amount sold at breakeven and identify:
(1) At what amount of units the shelves should be made from plastic polymer
(2) At what amount the shelves should be made from fibre & resin
(3) Below which amount the organisation should purchase the parts from the other company owned by the organisation?
