DBS is also expecting the demand for its top-of-the range devices to increase further from the next year. Given the increase in annual requirement, the production manager is contemplating to start manufacturing the special components in-house to save costs rather than sourcing them from outside.

1) Given the current purchase price of $4500 per unit, what will the average annual requirement need to be in order to justify making the components in-house if the variable cost of making is $3750 per unit and an upfront fixed cost of $27,500,000 is needed to procure the necessary plant and equipment? However, in the event that the expected increase in demand does not materialize and the demand is actually forecast to drop to 30,000 units next year, then what will be the maximum price per unit that DBS would be willing to pay to the supplier in order to continue buying from them?

2) Going forward, if it is found to be a better decision to make the components in-house, DBS will then need to select an optimal location point to set up its manufacturing facility. Given the following location information and expected material movements from several transportation depots to the DBS' intended manufacturing facility, find and plot the best location using centre-of -gravity method:

transportation depots x y expected material movements (no.of units)

1 5 15 15000

2 16 13 22000

3 10 5 8000

4 6 11 5400

5 18 6 10000

6 12 8 11500

3) Explain to the DBS operations manager some of the potential consequences of not understanding or considering non-quantifiable factors like local culture and practices when taking location decisions