Weixuan Ltd supplies electrical components to the motor industry. There are three types of components: the...

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Weixuan Ltd supplies electrical components to the motor industry. There are three types of components: the 'Alpha', the 'Epsilon' and the 'Rho'. The business plans next year to work at absolute full capacity are as follows: Expected Sales Alpha Epsilon Rho Service 4 J 12,000+ 7,000+ 17,000+ Epsilon cost analysis Selling price per unit Variable cost per unit Fixed cost per unit Net loss 4 d 4 The business's fixed costs total £720,000 a year. Each component takes the same time to manufacture. Selling Price £* 41 A marketing manager has suggested that the Epsilon is unprofitable. Her analysis is as follows: 80- 55 80 120* (65) (20) (5) Variable cost per units £ 25+ 65 85 [£720,000/(12,000 + 7,000+ 17,000)] Required: a) State, giving reasons, whether the Epsilon should be offered next year, assuming the sales of the other services could not be expanded to use spare capacity?" (2 marks) b) State, giving reasons, whether the Epsilon should be offered next year, assuming that the released capacity, from not producing Epsilon, could be used to produce a slightly upgraded component, the 'Zeta', for which customers would be charged £75 per unit, and which would have variable costs of £50 per unit? (1 mark) c) Comment, giving reasons, on whether your advice would change if it took twice as long to manufacture one unit of Zeta than any other service. < (2 marks) d) If producing the Zeta was not technically feasible, what is the minimum price per unit of Alpha that could be accepted for selling each Alpha component, assuming that the necessary capacity to expand it could come (only) from not offering the Epsilon service? That is, if the total company contribution were to remain unchanged (hint: There is no change to the Rho at all) and a unit of Alpha could be made instead of a unit of Epsilon with no changes to the current costs per unit of each. Weixuan Ltd supplies electrical components to the motor industry. There are three types of components: the 'Alpha', the 'Epsilon' and the 'Rho'. The business plans next year to work at absolute full capacity are as follows: Expected Sales Alpha Epsilon Rho Service 4 J 12,000+ 7,000+ 17,000+ Epsilon cost analysis Selling price per unit Variable cost per unit Fixed cost per unit Net loss 4 d 4 The business's fixed costs total £720,000 a year. Each component takes the same time to manufacture. Selling Price £* 41 A marketing manager has suggested that the Epsilon is unprofitable. Her analysis is as follows: 80- 55 80 120* (65) (20) (5) Variable cost per units £ 25+ 65 85 [£720,000/(12,000 + 7,000+ 17,000)] Required: a) State, giving reasons, whether the Epsilon should be offered next year, assuming the sales of the other services could not be expanded to use spare capacity?" (2 marks) b) State, giving reasons, whether the Epsilon should be offered next year, assuming that the released capacity, from not producing Epsilon, could be used to produce a slightly upgraded component, the 'Zeta', for which customers would be charged £75 per unit, and which would have variable costs of £50 per unit? (1 mark) c) Comment, giving reasons, on whether your advice would change if it took twice as long to manufacture one unit of Zeta than any other service. < (2 marks) d) If producing the Zeta was not technically feasible, what is the minimum price per unit of Alpha that could be accepted for selling each Alpha component, assuming that the necessary capacity to expand it could come (only) from not offering the Epsilon service? That is, if the total company contribution were to remain unchanged (hint: There is no change to the Rho at all) and a unit of Alpha could be made instead of a unit of Epsilon with no changes to the current costs per unit of each.