QUESTION 1 Motor Gucci Plc is a company that manufactures a novel type of cars for...

 

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QUESTION 1 Motor Gucci Plc is a company that manufactures a novel type of cars for the Asian and South Pacific regions. The company has two Divisions, the Engine Division and Assembly Division. The final products of the Engine Division are used as the engine in assembling the car parts. 500 The following data is available for the two Divisions: Engine Division ● ● ● ● Assembly Division · 150 500 = 150-03x 0.3x = 3,50 At a market price of M500, there is currently no demand for engines However, demand increases by 200 units for every M60 reduced from the price. The variable cost per engine is M150 There are no capacity constraints Equations to use for calculations are: P = a-bx MR = a-2bx 1166:674 MRE REME 150-26x = 150- At a market price of M700, there is currently no demand for the finished truck produced However, demand increases by 400 units for every M100 reduced from the price. The variable cost per truck is M200 (excluding the cost of the engine) Hi low. VC = H₂-lr * H₂_h₂ € a) find the optimum number of units to be made by the Parts Division and the optimal price to be charged (5marks) b) based on the above engine price, find the optimum number of trucks to be made by assembly division (4marks) c) Find the optimum number of vehicles and price that will maximise the Group's profits (6marks) d) Differentiate between Economic Value Added (EVA) and Return on Investment (ROI) as measures for divisional performance and give ONE advantage and disadvantage of each. (6marks) e) Distinguish between how maximum price and minimum price are used by the buying and selling divisions in a group to negotiate their prices. (4marks) (Total marks =25) QUESTION 1 Motor Gucci Plc is a company that manufactures a novel type of cars for the Asian and South Pacific regions. The company has two Divisions, the Engine Division and Assembly Division. The final products of the Engine Division are used as the engine in assembling the car parts. 500 The following data is available for the two Divisions: Engine Division ● ● ● ● Assembly Division · 150 500 = 150-03x 0.3x = 3,50 At a market price of M500, there is currently no demand for engines However, demand increases by 200 units for every M60 reduced from the price. The variable cost per engine is M150 There are no capacity constraints Equations to use for calculations are: P = a-bx MR = a-2bx 1166:674 MRE REME 150-26x = 150- At a market price of M700, there is currently no demand for the finished truck produced However, demand increases by 400 units for every M100 reduced from the price. The variable cost per truck is M200 (excluding the cost of the engine) Hi low. VC = H₂-lr * H₂_h₂ € a) find the optimum number of units to be made by the Parts Division and the optimal price to be charged (5marks) b) based on the above engine price, find the optimum number of trucks to be made by assembly division (4marks) c) Find the optimum number of vehicles and price that will maximise the Group's profits (6marks) d) Differentiate between Economic Value Added (EVA) and Return on Investment (ROI) as measures for divisional performance and give ONE advantage and disadvantage of each. (6marks) e) Distinguish between how maximum price and minimum price are used by the buying and selling divisions in a group to negotiate their prices. (4marks) (Total marks =25)

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