1. What sourcing decision for the X73 materials is in the best interest of: a) The Electronic Components Division (ECD)?
While we assume the other two supplies won’t source components from ECD, apparently the sourcing decision would favour ECD if HighResolution is selected (€ 3600) since the capacity is not full yet
b) The Imaging Systems Division (ISD)?
|Target Price of X73 |€340,000 | | | | | | |Manufacturing Cost |HighResolution |Display Tech. Inc. | |Display |€140000 |€105000 | |Other Components |€72000 |€72000 | |Conversion (Fixed) |€117700 |€117700 | |Conversion (Variable) |€26300 |€26300 | |GP for ISD |€-16,000 |€19,000 |
After putting all costs incurred in manufacturing of X73, if ISD select HighResolution as the supplier, the gross profit is negative, if display tech is selected, it will be positive. It’s obviously choosing Display Tech. as the supplier would fit the best interest of ISD.
c) The High Resolution Division?
It is obvious that High Resolution would be benefited if he is selected as the supplier of the display (€35000).
d) MedQuip AG as a whole?
As attached profit for 3 divisions are calculated in their respect, while we taken into account all benefits for the whole group by adding up benefits all 3 divisions, the benefit to the group is €22600 compared to €19000 if display tech. inc is selected. Therefore, High Resolution should be selected if we solely consider the...