Part A: Single Option:

Sycamore Solutions Corp. (SSC) has identified an opportunity to invest in a process to make medical grade face shields to help satisfy the continuing demand for PPE in the health care sector during the ongoing COVID-19 pandemic. While they have experience producing similar molded plastic products, they do not have the equipment to make shields currently. They would need to invest in a computer-controlled molding process that could make the primary shield and attach it to a headband so that the shield could be worn.

The molding machine would cost $2,750,000and could be in place in 3 months from today (September 1, 2023). It would cost $2.65per mask to make the shield and attach it to the headband. Headbands would be purchased from a supplier at a cost of $1.00 each. Each finished face shield would be individually sealed in a sterile plastic wrap using existing machinery at a cost of $0.40 per unit. The finished product would be packaged in cases of 48 and it would cost them $6.00 for materials and labor to package each case.Once in place, MBAC figures their new process could produce and package 45,000 masks per month. Each case would sell for $420, and they would only sell case quantities.

Demand for shields is very high and expected to remain significant for the next couple of years at least. SSC forecasts that demand for their shields at the planned price point currently exceeds their planned capacity at an estimated current level of 90,000 units per month. Demand is expected to remain steady for 6 months from today, after which demand is projected to drop 6% month over month for the next 6 months, and then decrease 3% month over month for the next 12 months where it will then stabilize for the foreseeable future.

What would be the break-even point (units/cases of sales) for SSC if they decide to invest in this opportunity?When would it be achieved?

Part B: Alternative Options

As the process engineering department continued researching options, they found two other attractive alternatives for MBAC to invest in.

Option B1: They could also buy an injection molding machine to bring production of the headband in-house.(The shields would still be produced by the machine in option A.) This additional machine would cost $800,000, and would allow MBAC to produce headbands at a cost of $0.50 each.The capacity of this machine would be 60,000 per month and could come on line the same time as the machine from Part A.

Option B2: A final option would be to instead procure an integrated molding process that could produce both the shield and headband. The cost of this combined process would be $4,200,000. This could produce a complete single face shield at a cost of $2.80, including assembling the shield. This process would have a capacity of 55,000 finished units per month. This equipment would take 6 or perhaps 7 months to get on site and operational.

Perform a thorough break-even analysis comparing all three of these options. Present a report explaining your results and the implication for management.Include any issues you think management should consider in addition to your BEP analysis. (Hint: A thorough analysis here will go beyond the class examples. With different procurement lead times and production capacities, time becomes a factor to consider.)