Question

A bill of materials is used in manufacturing and production to show all of the parts and materials required to manufacture a specific item or for the subassembly of a finished product, such as a motorcycle. The information in the bill of materials is useful for determining product costs, coordinating orders, and managing inventory. It can also show how product costs will be affected by price changes in components or raw materials. This project provides you with an opportunity to use spreadsheet software to perform a sensitivity analysis showing the impact of various prices for component parts on the total costs of a dirt bike. The bill of materials for this project has been simplified for instructional purposes.

Dirt Bikes’s management has asked you to explore the impact of changes in some of its parts components on production costs. Review the spreadsheet file containing bill of materials information for the brake system for Dirt Bikes’s Moto 300 model, which can be found on the Laudon Web site for this chapter. The completed bill of materials contains the description of the component, the identification number of each component, the supplier (source) of the component, the unit cost of each component, the quantity of each component needed to make each finished brake system, the extended cost of each component, and the total materials cost. The extended cost is calculated by multiplying the quantity of each component needed to produce the finished brake system by the unit cost. The prices of components are constantly changing, and you will need to develop a spreadsheet application that can show management the impact of such price changes on the cost to produce each brake system and on total production costs for the Moto 300 model.

Complete the bill of materials by calculating the extended cost of each component and the total materials cost for each brake system.

Develop a sensitivity analysis (refer to pages 472-473) to show the impact on total brake system materials costs if the front brake calipers unit cost ranges from $103 to $107 and if the brake pipe unit cost ranges from $27 to $30.

The brake system represents 30 percent of the total materials cost for one Moto 300 motorcycle. Use sensitivity analysis again to show the impact of the changes in front brake caliper unit costs and brake pipe unit costs described previously on total materials costs for this motorcycle model.

Bill of Materials: Moto 300 Brake System
Component	Component No.	Source	Unit Cost	Quantity	Extended Cost
Brake cable	M0593	Nissin	27.81	1
Brake pedal	M0546	Harrison Billet	6.03	2
Brake pad	M3203	Russell	27.05	2
Front brake pump	M0959	Brembo	66.05	1
Rear brake pump	M4739	Brembo	54.00	1
Front brake caliper	M5930	Nissin	105.20	1
Rear brake caliper	M7942	Nissin	106.78	1
Front brake disc	M3920	Russell	143.80	1
Rear brake disc	M0588	Russell	56.42	1
Brake pipe	M0943	Harrison Billet	28.52	1
Brake lever cover	M1059	Brembo	2.62	1
Book for examples is Management Information Systems Managing the Digital Firm 14 e Kenneth C. Laudon and Jane P. Laudon

Answer 1

From the data given, The extended price of each of the component in the Brake System can be calculated by multiplying the unit Cost with the Quantity.

For Eg: The extended Cost of Brake Cable = $27.81 X 1 = $27.81.

Total Cost of Brake System = Sum of all the extended Costs = $657.36

Cost of Brake System is 30% of that of the Dirt Bike. Hence Total Cost of Dirt Bike = 657.36 x 100/30 = $2191.2

Refer the table below for the Extended Cost, Cost of Brake System & the Cost od Dirt Bike

Sensitivity Analysis of the cost of Brake Pipe and Brake Caliper on the Price of Brake System and The total Price of the Dirt Bike is done with the help of Data Table in MS Excel. the Output of teh same is given below