Part B: Application Questions / 50 marks
Please answer ALL questions
You are the General Manager for the manufacturing and building company GC Housing which specialises in prefabricated residential housing. Annually your company turns over 10 million RMB per year and yearly sales have been dropping. There is a new manufacturing and building company that has entered the market. They make houses similar to GC Housing and could be the reason for GC Housing’s drop in sales. Market intelligence has discovered that the competing housing company is producing and building 30 houses per week. Three times more than what you are producing. They are also selling their houses for slightly more than what you are selling your houses for. You sell each house for 19,230 RMB. Each house costs you 8,000 RMB to produce. Your fixed costs including labour, heating, insurances and maintenance are 10,000 RMB per week.
You recognise that your technology in producing pre-fabricated building materials is outdated. You have just viewed the most recent 3D machine that can produce the frame of 10 houses in one day. Also, the frame is 40% stronger and cheaper to manufacture than your current houses.You currently produce and erect 10 pre-fabricated houses across 7 days, equivalent to 27,471 RMB per day. Based on your current production this is equivalent to 274,471 RMB per week and 14,284,920 RMB per year.
GC Housing is made up of 1,000 employees. 500 of these employees work in manufacturing, warehousing and logistics. The remaining 500 employees are employed in erecting the houses. If you were to purchase the new 3D machinery you would require 100 employees to operate the new machinery, warehouse and logistics side of your business, and you would require an increase in building employees to erect the houses. You also need to set up a marketing and sales department to sell 70 houses per week; as well as establish an IT department for maintenance.
The net cost to purchase the 3-D machinery is 19 million RMB.
The above information is the basis for ALL QUESTIONS in this part (Q.11, Q.12 and Q.13).