BMAN210 SECTION B Answer TWQ questions (30 marks per question) Question 6 ScanPlus develops and supplies mobile health screening technology for use healthcare sector. Client screening supports the value proposition by enabling better access between registered s primarily are within the private sector, where mobile patients and healthcare professionals. As part of its process of developing new products, ScanPlus requires its mobile scanners to meet particular target costs before they are approved for manufacture Cost and revenue estimates are below and mobile The table immediately below shows the estimates made by design engineers market forecasting personnel at ScanPlus to enable a target cost analysis of the scanners in the healthcare sector. It may be assumed these will have only a three year life-cycle. Data regarding costs have been arrived at based on small scale manufacture of a prototype, and on the performance of the mobile scanners. Data relating to demand and sales prices have been sourced from the firm's market forecasting system and based also on negotiations with potential customers. Estimates of Costs and Revenues Year 1 90 400,000 Year 2 Year 3 Number of mobile scanning devices made and sold units 140 165 Anticipated price per mobile scanning device (f p/unit) Design costs: R&D costs 360,000 320,000 1,600,000 1,600,000 1,600,000 1,200,000 1,200,000 1,200,000 Engineering costs Man Variable (material purchase) cost per unit Variable (processing) cost/ batch Units per batch Fixed (production capacity) costs Marketing & Distribution Costs: turing Cost 195,000195,000 195,000 210,000 210,000 210,000 12 5,000,000 5,000,000 5,000,000 Fixed (marketing) costs Fixed warehousi 2,000,000 2,000,000 2,000,000 800,000 800,000 800,000 Question 6 continued overleaf PT ng The Chief Research Officer has made the assumption that, after three years, yet another scanner design will be needed to keep ahead in the healthcare sector Page 2 of 8 - BMAN21040 Question 6 continued The firm's expectation is for a target net operating income an through a com sales over the three year period. This target has been arlcompetitor benchm be asked amounting to 16% of total This target has been arrived at through a combination competitor benchmarking. I of historical rates of achievement by ScanPlus itself and this target is not set to be achieved, engineers and mark to reconsider mfctured. of mobile scanners and how they are manufactured REQUIRED designed) will meet the income amounting to 16% oftotal sales over the [15 marks) (a) Establish whether the mobile scanners (as currently required target (net operating three year period) AND (b) If the target (net operating income amounting to 16% of total sales over the proposad courses of adono met, conaider the implications of the following i. Variable material purchase costs per unit are currently estimated at 195,000 (see Table above). Engineers have proposed joining ina global buying consortium that (through "economies of scale) might allow unitcosts to bereduced by 10% for each of the three years of mobile , i. Currently, the engineering costs are estimated at 1.2m per year in each of the three years (see Table above). Some ScanPlus engineers have noted that, for little or no additional cost, the engineering work could be made relevant to both the scanners under examination, and a next- generation of product. They estimate that pursuing such "economies of scope" could reduce the design costs attributed to the current scanners by 15% per annum. be by 15%rtthaaition, a Warehousing costs were deemed excessive and the procurement officer has identified an outsource contractor who can offer a more flexible solution that grows or contracts with the business, saving 100,000 annually. ili. You should compute the revised total allowable life-cycle costs, the total anticipated costs of the revised design and comment on whether, and by how much the revised design meets the target cost. [15 marks] PTO Page 3 of 8 BMAN210 SECTION B Answer TWQ questions (30 marks per question) Question 6 ScanPlus develops and supplies mobile health screening technology for use healthcare sector. Client screening supports the value proposition by enabling better access between registered s primarily are within the private sector, where mobile patients and healthcare professionals. As part of its process of developing new products, ScanPlus requires its mobile scanners to meet particular target costs before they are approved for manufacture Cost and revenue estimates are below and mobile The table immediately below shows the estimates made by design engineers market forecasting personnel at ScanPlus to enable a target cost analysis of the scanners in the healthcare sector. It may be assumed these will have only a three year life-cycle. Data regarding costs have been arrived at based on small scale manufacture of a prototype, and on the performance of the mobile scanners. Data relating to demand and sales prices have been sourced from the firm's market forecasting system and based also on negotiations with potential customers. Estimates of Costs and Revenues Year 1 90 400,000 Year 2 Year 3 Number of mobile scanning devices made and sold units 140 165 Anticipated price per mobile scanning device (f p/unit) Design costs: R&D costs 360,000 320,000 1,600,000 1,600,000 1,600,000 1,200,000 1,200,000 1,200,000 Engineering costs Man Variable (material purchase) cost per unit Variable (processing) cost/ batch Units per batch Fixed (production capacity) costs Marketing & Distribution Costs: turing Cost 195,000195,000 195,000 210,000 210,000 210,000 12 5,000,000 5,000,000 5,000,000 Fixed (marketing) costs Fixed warehousi 2,000,000 2,000,000 2,000,000 800,000 800,000 800,000 Question 6 continued overleaf PT ng The Chief Research Officer has made the assumption that, after three years, yet another scanner design will be needed to keep ahead in the healthcare sector Page 2 of 8 - BMAN21040 Question 6 continued The firm's expectation is for a target net operating income an through a com sales over the three year period. This target has been arlcompetitor benchm be asked amounting to 16% of total This target has been arrived at through a combination competitor benchmarking. I of historical rates of achievement by ScanPlus itself and this target is not set to be achieved, engineers and mark to reconsider mfctured. of mobile scanners and how they are manufactured REQUIRED designed) will meet the income amounting to 16% oftotal sales over the [15 marks) (a) Establish whether the mobile scanners (as currently required target (net operating three year period) AND (b) If the target (net operating income amounting to 16% of total sales over the proposad courses of adono met, conaider the implications of the following i. Variable material purchase costs per unit are currently estimated at 195,000 (see Table above). Engineers have proposed joining ina global buying consortium that (through "economies of scale) might allow unitcosts to bereduced by 10% for each of the three years of mobile , i. Currently, the engineering costs are estimated at 1.2m per year in each of the three years (see Table above). Some ScanPlus engineers have noted that, for little or no additional cost, the engineering work could be made relevant to both the scanners under examination, and a next- generation of product. They estimate that pursuing such "economies of scope" could reduce the design costs attributed to the current scanners by 15% per annum. be by 15%rtthaaition, a Warehousing costs were deemed excessive and the procurement officer has identified an outsource contractor who can offer a more flexible solution that grows or contracts with the business, saving 100,000 annually. ili. You should compute the revised total allowable life-cycle costs, the total anticipated costs of the revised design and comment on whether, and by how much the revised design meets the target cost. [15 marks] PTO Page 3 of 8