Consider the information provided below. Show a brief report for senior management for each part as instructed. Write each report separately, assuming the report for Part B is written sometime after the report for Part A was written. Also, assume the procurement and installation lead time times given in each part are from April 1 (don't try to figure any partial months due to the time it takes to write the reports). Clearly state and justify any assumptions you have made in your analysis. Your reports should be prepared with Word and long enough to present the information requested, clearly and concisely, while also showing/explaining how you arrived at your answers.

Spreadsheet analysis won't be necessary here, but If you do use Excel in performing your work, it would be appropriate to include your spreadsheets as appendices to your reports.

Part A: Single Option:

Sycamore Health Supplies (SHS) has identified an opportunity to invest in a process to make medical grade face shields to help satisfy the increased demand for PPE in the health care sector. 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 $2,400,000 and could be in place in 3 months from today (April 1). It would cost $2.90 per mask to make the shield and attach it to the headband. Headbands would be purchased from a supplier at a cost of $1.10 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 $7.20 for materials and labor to package each case. Once in place, SHS figures their new process could produce and package an average of 50,000 masks per month. Each case would sell for $420, and they would only sell case quantities. Customers expect delivery of the product when ordered - they will not accept having to backorder product. Demand for shields is very high and expected to remain there for the next couple of years at least. SHS forecasts that demand for their shields at the planned price point currently exceeds their planned capacity at an estimated current (April 1) level of 90,000 per month. Demand is expected to remain steady for 6 months, after which demand is projected to drop 7% 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.

A1: What would be the break-even point for SHS if they decide to invest in this opportunity? A2: When would it be achieved? (Consider the lead time for implementation of the new process and what actual sales would be given demand and capacity constraints.)

Part B: Alternative Options:

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

Option B1:

In addition to the machine in part A, they could buy an injection molding machine to bring production of the headband in-house. This additional machine would cost $700,000, and would allow SHS to produce headbands at a cost of $0.60 each instead of buying them from a vendor. The capacity of this machine would be 80,000 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 a single integrated molding process that could produce both the shield and headband. The cost of this combined process would be $3,950,000. This could produce all the material for a single face shield at a cost of $3.00 including assembling the shield. [Sterile plastic wrap and case packaging would still be required at additional cost.] This process would have a capacity of 60,000 finished units per month. This equipment would take 5 or perhaps 6 months to get on site and operational.

Perform a break-even analysis comparing all three of these options (A, B1, and B2). Over what range of demand would each alternative be the lowest cost option?