VIETNAM NATIONAL UNIVERSITY – HCMC
INTERNATIONAL UNIVERSITY
BAXXXIU
Management Information Systems
(MIS)
ASSIGNMENT
MIS Project
(Teamwork, 30%)
Due date: Session 10,11
Instructor:
Dr. Tich Phuoc (Patrick) Tran
Ms. Hoang Thi Anh Ngoc
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Tables of Contents
1.
2.
3.
Instructions ...................................................................................................................................... 3
1.1.
Part 1: Case Study .................................................................................................................... 3
1.2.
Part 2: Addressing MIS Issues of a Company ........................................................................... 3
Dirt Bikes USA Company................................................................................................................ 4
2.1.
Introduction to Dirt Bikes USA ................................................................................................ 4
2.2.
Company History and Background ........................................................................................... 4
2.3.
Organization Chart and Employees .......................................................................................... 4
2.4.
Products and Services .............................................................................................................. 5
2.5.
Sales and Marketing ................................................................................................................. 5
2.6.
Selected Financial Data ............................................................................................................ 6
Questions by topics .......................................................................................................................... 7
3.1.
Understanding Information System Requirements .................................................................... 7
3.2.
Analyzing Financial Performance ............................................................................................. 7
3.3.
Improving Decision Making: Analyzing Competitive Strategy ................................................. 8
3.4.
Achieving Operational Excellence: Developing a Web Site Privacy Policy .............................. 8
3.5.
Improving Decision Making: Making the Rent vs. Buy Decision for Hardware and Software .. 8
3.6.
Improving Decision Making: Redesigning the Customer Database ........................................... 9
3.7.
Improving Operational Excellence: Identifying Supply Chain Management Solutions ........... 10
3.8.
Achieving Operational Excellence: Developing an E-Commerce Strategy .............................. 10
3.9.
Achieving Operational Excellence: Identifying Opportunities for Knowledge Management .... 11
3.10.
Improving Decision Making: Analyzing the Impact of Component Price Changes .............. 11
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1. Instructions
This assignment has two parts and you will be working in groups of five. In a nutshell, each group will do
one case study and use their knowledge and skills learned in this course to address issues related to MIS
of a hypothetical company namely Dirt Bikes USA. Groups will present their assigned case studies on the
weekly basis and present their analysis on Dirt Bikes USA at the end of this course.
Items
Weight
Deliverables
1. Case Study
5%
Presentation, Report
2. Addressing MIS issues
25%
Presentation, Report
Total
30%
1.1. Part 1: Case Study
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Weight: 5%
Deliverables
o Presentation (max 15 minutes): schedule to be announced
o Report (max 2 pages): to be submitted at the end of the semester
Each group will be assigned with one case study corresponding to a chapter in the text book by your
instructor. You will have 1 week to prepare for your presentation.
1.2. Part 2: Addressing MIS Issues of a Company
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•
Weight: 25%
Deliverables
o Presentation (max 45 minutes): schedule to be announced
o Report (max 40 pages): to be submitted at the end of the semester
You will apply MIS knowledge and skills to analyze a hypothetical company, called Dirt Bikes USA and
address its issues related to MIS. Imagine that you have been asked to serve as a consultant to help Dirt
Bikes solve some of the problems it is encountering. There are 10 questions organized by textbook
topics/chapters for you to investigate as followed:
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Company overview
o Question 1: Understand the business and the information system requirements [Research]
Financial performance
o Question 2: Understand financial health [Spreadsheet]
Competitive analysis
o Question 3: Competitive environment and customer value creation [Research]
Information security
o Question 4: Web privacy [Research]
Database management
o Question 6: Customer profiling [MS Access]
Internet technology
o Question 7: Search for supply chain management [Research]
o Question 8: E-Commerce strategy [Research]
Knowledge management
o Question 9: Knowledge assets and management systems [Research]
Data analysis for improving decision making
o Question 10: Impacts of component price changes [Spreadsheet]
o Question 5: IT Purchasing/investment decision making [Spreadsheet]
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To develop solutions, you may need to do Web research and to use spreadsheet, database, or Web
browser software tools, and you will need to use a word processor to write up your findings. For each
topic, a list of the software tools and business skills that you will need to use will be provided. You may
also wish to review the textbook chapters related to the topic you are investigating.
At the end of this course, you will present to the class your findings and compile a written report with
greater details. In order to complete your assignments, you should familiarize yourself with Dirt Bikes.
To learn more about the company and how it works, please read the following sections for
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Company History and Background
Organization Chart and Employees
Products and Services
Sales and Marketing
Selected Financial Data
Make sure that you have all the required data files (spreadsheet, database files) mentioned in this guide.
2. Dirt Bikes USA Company
2.1. Introduction to Dirt Bikes USA
Dirt Bikes USA is a small company headquartered in Carbondale Colorado that manufactures and sells its
own brand of off-road motorcycles. It was founded in 1993 to product dirt bikes that could be customized
for racing and off-road recreational riding using the best quality components and parts from all over the
world. The company has continued to grow and now faces a new set of challenges and opportunities.
You have been asked to serve as a consultant to apply your information systems knowledge to help Dirt
Bikes solve some of the problems it is encountering.
2.2. Company History and Background
Dirt Bikes USA was founded in 1993 by Carl Schmidt and Steven McFadden, two young but experienced
bikers with engineering backgrounds who saw that dirt bikes were becoming very popular in the United
States as both sporting and racing motorcycles. They developed frames for dirt bikes that were more
suited to off-road handling and started using these frames to build their own dirt bike models using
motorcycle engines manufactured by other companies, such as Honda and Rotax Motors of Austria.
Riding on one of their customized dirt bikes, Steven finished first in the famous Barstow to Las Vegas
race. There was so much interest in Carl and Steve’s bikes that they decided to open a production facility
that could manufacture large numbers of their dirt bikes for the retail market. They opened a small
production facility in Carbondale which has since expanded to house 120 workers involved in production,
design, and engineering and a corporate sales and administrative staff of close to 20 employees. Over the
years Dirt Bikes USA has enhanced and expanded its product line to include dirt bike models optimized
for racing and for off-road recreational use. Its racing models have placed well-and often placed first-- in
the many dirt bike races staged throughout the United States, including the Barstow-Las Vegas race and
competitions at Daytona Bike Week.
2.3. Organization Chart and Employees
Dirt Bikes USA is still privately owned with Carl serving as CEO and Steven as President and Chief
Operating Officer. About 120 employees work in design, engineering and production, including 3 fulltime product designers and 3 engineers. In addition to a 4-person Parts department, Dirt Bikes maintain a
ten-person service department to service warranties and customer problems with parts and motorcycle
performance. Five employees work in Dirt Bikes’ shipping and receiving department. Dirt Bikes’ sales
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staff consists of a marketing manager and 5 sales representatives, two for the West coast and Western
United States, one for the Midwest, one for the Northeast and one for the South. The corporate
administrative staff consists of a controller, one accountant, one administrative assistant; two human
resources staff members, three secretaries, and two information systems specialists to support systems
servicing all of the business functional areas. Please refer to [Dirt Bikes Org Chart.ppt] for Dirt Bikes’
organization chart.
The company maintains a very friendly family atmosphere, encouraging teamwork, attention to detail and
quality, and continual learning and innovation. Employees, distributors, and retail customers are urged to
contribute ideas on how to improve Dirt Bikes’ products and service.
2.4. Products and Services
Dirt Bikes’ founders realized that the most popular dirt bikes were foreign brands and wanted to capitalize
on their proximity to the dirt bikes racing circuit and market in the United States. Carl and Steve hoped
they could develop bikes that performed and looked better than the competition by using the best custom
parts available. Dirt Bikes does not hesitate to use quality components from all over the world. The
engines for Dirt Bikes are Rotax engines from Austria and tires are from Dunlop, but many of their parts,
such as shock absorbers, front wheel forks, exhaust pipes, and headlights, are from the United States. Dirt
Bikes makes its own frames, shaping them to give them the unique spirited style for which the company
is noted. The company’s parts and service business accounts for about 15% of its total revenue.
Manufacturing and selling dirt bikes is a complex business. Dirt bike racing has many forms, including
racing specifically for different size bikes, for short distances, long distance, and even for up to six days.
Enduro bikes are for cross-country racing and motocross bikes are specially designed for racing in an
enclosed dirt course that can consist of a variety of terrains; uphill, downhill, corners, jumps, and so forth.
Dirt Bikes currently produces four models: the Enduro 250, the Enduro 550, the Moto 300 and the Moto
450. The two Enduros are endurance racers, while the Motos are for motocross racing. All four are very
modern, with such technology as both kick and electric starters, steering stabilizers, and liquid cooling.
The large majority of these bikes are sold in the United States for between $3,250 and $9000 retail. (The
Enduro 250 retails for $3250, the Enduro 550 retails for $7600, the Moto 300 retails for $4295 and the
Moto 450 retails for $8995.) Dirt Bikes has appealed primarily to serious trail and Enduro riders,
although it is making inroads into the motocross market.
2.5. Sales and Marketing
Dirt Bikes does not sell directly to retail customers, relying on a network of 40 distributors concentrated
in the Western and Midwestern United States. A small percentage of Dirt Bikes are sold in Europe using
independent distributors that sell other brands of dirt bikes and motorcycles as well as Dirt Bikes. Dirt
Bikes’ motorcycles, parts, and service, including warranty repairs, can only be obtained through an
authorized Dirt Bikes dealer. All motorcycle and spare parts sales, shipping and set-up must be handled
by a certified dealer. If a potential customer lives more than 50 miles from the nearest authorized Dirt
Bikes dealer, the customer can purchase a Dirt Bike or Dirt Bike parts through a certified independent
motorcycle dealer. Retail customers can purchase spare parts directly from Dirt Bikes only by verifying
that they live more than 50 miles from an authorized Dirt Bikes dealer.
Dirt Bikes’ sales department works closely with Dirt Bikes’ distributors. One of its key responsibilities is
to aggressively promote Dirt Bikes at dirt bike racing and other events. Many Dirt Bikes employees are
dirt bike racing enthusiasts themselves. Several are official company racers representing the company in
dirt bike racing competition. Dirt Bikes recently established a Dirt Bikes USA Owners’ Group to
promote stronger relationships with customers and to make it easier for them to share their Dirt Bikes
USA experiences. Dirt Bikes also advertises in magazines devoted to motorcycle racing and dirt bikes. It
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uses a small public relations firm to place articles about new company products or racing victories in
these magazines. Dirt Bikes also pays for ads in these publications.
2.6. Selected Financial Data
We have provided a spreadsheet with three worksheets containing Dirt Bikes financial data for you to
review [Dirt Bikes Financial Data.xls]:
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Income statement and summary balance sheet data from 2005-2007
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Annual sales of each Dirt Bikes model between 2003 and 2007
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Total domestic vs. international motorcycle sales between 2003 and 2007
The income statement and balance sheet are the primary financial statements used by management to
determine how well a firm is performing. The income statement, also called an operating statement or
profit and loss statement, shows the income and expenses of a firm over a period of time, such as a year, a
quarter, or a month. The gross profit represents the difference between the firm’s revenue (or sales) and
the cost of goods sold. The gross margin is calculated by dividing gross profit by revenues (or sales).
Net profit (or loss) is calculated by subtracting all other expenses, including operating expenses and
income taxes from gross profit. Operating expenses are all business costs (such as expenditures for sales
and marketing, general and administrative expenditures, and depreciation) other than those included in the
cost of goods sold. Net margins are calculated by dividing net profit (or loss) by revenues (or sales).
A balance sheet provides a snapshot of a company’s financial assets and liabilities on a given date,
usually the close of an accounting period. It lists what material and intangible assets the business owns
and what money the business owes either to its creditors (liabilities) or to its owners (shareholders’
equity, also known as net worth). We have included here are only the most important pieces of balance
sheet data for you to review. At any given time a business’s assets equals the sum of its liabilities plus its
net worth. Current assets include cash, securities, accounts receivable, or other investments that are likely
to be converted into cash within one year. Current liabilities are debts that are due within one year. Longterm debt consists of liabilities that are not due until after a year or more. If too much debt has been used
to finance the firm’s operations, problems may arise in meeting future interest payments and repaying
outstanding loans.
By examining a series of financial statements one can identify and analyze trends in the financial strength
of a business. When examining Dirt Bikes’ income statement and balance sheet data, pay special
attention to the company’s three-year trends in revenue (sales), costs of goods sold, gross margins,
operating expenses, and net income (or loss). Pay attention to whether the company’s short and longterm liabilities are growing and whether they exceed assets. If a company has more current assets than
current liabilities, it is a sign that it probably has enough working capital to fund investments in new
equipment or information systems.
The two other spreadsheets present motorcycle shipment data between 2003 and 2007, which can be used
to gauge motorcycle sales. When examining these spreadsheets, pay attention to the trends in sales. This
includes the sales trends for each product Dirt Bikes sells, overall sales trends, and the proportion of
international to domestic sales.
The next Section provides a list of questions on Dirt Bikes organized by textbook chapters/topics. After
learning a chapter, students should attempt to use their acquired knowledge and skills to answer
relevant questions. A final report will be compiled to consolidate all the topics upon the due date.
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3. Questions by topics
3.1. Understanding Information System Requirements
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Software skills: Presentation software
Business skills: Management analysis and information system recommendations
Question 1:
Dirt Bikes’s management has asked you to prepare a management analysis of the company to help it
assess the firm’s current situation and future plans. Review Dirt Bikes’s company history, organization
chart, products and services, and sales and marketing in the Introduction to Dirt Bikes. Then address these
issues:
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What are the company’s goals and culture?
What products and services does Dirt Bikes USA provide? How many types of products and
services are available to customers? How does Dirt Bikes sell its products?
What are the strengths and weaknesses of Dirt Bikes’ organizational structure (e.g. being
moderately hierarchical)?
What are the functionalities of information systems that would be appropriate for a company such
as Dirt Bikes?
3.2. Analyzing Financial Performance
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Software skills: Spreadsheet charts and formulas
Business skills: Financial statement analysis
As part of your analysis of the company for management, you have been asked to analyze data on Dirt
Bikes’s financial performance. Review Dirt Bikes’s selected financial data in the Introduction to Dirt
Bikes, which can be found at the Laudon Web site. There you will find Dirt Bikes’s income statement and
summary balance sheet data from 2005 to 2007, annual sales of Dirt Bikes models between 2003 and
2007, and total domestic versus international sales between 2003 and 2007.
Use your spreadsheet software to create graphs of Dirt Bikes’s sales history from 2003 to 2007 and its
domestic versus international sales from 2003 to 2007. Select the type of graph that is most appropriate
for presenting the data you are analyzing.
Use the instructions at the Laudon Web site and your spreadsheet software to calculate the gross and net
margins in Dirt Bikes’s income statements from 2005 to 2007. You can also create graphs showing trends
in selected pieces of Dirt Bikes’s income statement and balance sheet data if you wish. (You may want to
rearrange the historical ordering of the data if you decide to do this.)
Question 2:
Address the following issues:
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What are Dirt Bikes’s best- and worst-performing products? What is the proportion of domestic
to international sales? Have international sales grown relative to domestic sales?
Are sales (revenues) growing steadily, and, if so, at what rate? What is the cost of goods sold
compared to revenues? Is it increasing or decreasing? Are the firm’s gross and net margins
increasing or decreasing? Are the firm’s operating expenses increasing or decreasing? Is the firm
heavily in debt? Does it have assets to pay for expenses and to finance the development of new
products and information systems?
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3.3. Improving Decision Making: Analyzing Competitive Strategy
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Software skills: Web browser software and presentation software
Business skills: Value chain and competitive forces analysis, business strategy formulation
This project provides an opportunity for you to develop the competitive strategy for a real-world business.
You’ll use the Web to identify Dirt Bikes’s competitors and the competitive forces in its industry. You’ll
use value chain analysis to determine what kinds of information systems will provide the company with a
competitive advantage.
Dirt Bikes’s management wants to be sure it is pursuing the right competitive strategy.
Question 3:
You have been asked to perform a competitive analysis of the company using the Web to find the
information you need. Address the following issues:
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How does Dirt Bikes create value for its customers through a range of activities such as supply
chain management, manufacturing, marketing, sales and services?
Use the Web to research on what other companies are Dirt Bikes’s major competitors? How do
their products compare in price to those of Dirt Bikes? What are some of the product features
they emphasize?
What are the competitive forces that can affect the industry (Hints: PEST analysis and Porter’s
five forces)?
What competitive strategy should Dirt Bikes pursue (e.g. low cost v.s. differentiation)?
How information systems best support that strategy?
3.4. Achieving Operational Excellence: Developing a Web Site Privacy Policy
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Software skills: Web browser software and presentation software
Business skills: Corporate privacy policy formulation
Dirt Bikes’s management wants to make sure it has policies and procedures in place to protect the privacy
of visitors to its Web site. You have been asked to develop Dirt Bikes’s Web site privacy policy.
Question 4:
Addresses the following issues:
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How much data should Dirt Bikes collect on visitors to its Web site? What information could it
discover by tracking visitors’ activities at its Web site? What are the privacy problems raised by
collecting such data?
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Should Dirt Bike use cookies? What are the advantages of using cookies for both Dirt Bikes and
its Web site visitors? What privacy issues do they create for Dirt Bikes?
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Should Dirt Bikes join an organization such as TRUSTe to certify that it has adopted approved
privacy practices? Why or why not? What information should be included in a privacy statement?
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Should Dirt Bikes adopt an opt-in or opt-out model of informed consent?
3.5. Improving Decision Making: Making the Rent vs. Buy Decision for Hardware
and Software
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Software skills: Spreadsheet formulas, electronic presentation software (optional)
Business skills: Technology rent vs. buy decision, TCO analysis
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This project provides an opportunity for you help a real-world company make a decision about whether
to rent or buy new technology. You’ll use spreadsheet software to compare the total three-year cost of
licensing and maintaining new manufacturing software or renting the software from an application service
provider.
Dirt Bikes would like to implement new production planning, quality control, and scheduling software for
use by 25 members of its manufacturing staff. Management is trying to determine whether to purchase
the software from a commercial vendor along with any hardware required to run the software or to use a
hosted software solution from an application service provider. (The hosted software runs on the ASP’s
computer.) You have been asked to help management with this rent vs. buy decision by calculating the
total cost of each option over a three-year period.
The costs of purchasing the software (actually for purchasing a license from the vendor to use its software
package) include the initial purchase price of the software (licensing fee of $100,000 paid in the first
year), the cost of implementing and customizing the software in the first year ($20,000), one new server
to run the software (a first-year purchase of $4000), one information systems specialist devoting half of
his or her time to supporting the software ($55,000 in full-time annual salary and benefits with a 3%
annual salary increase each year after the first year), user training in the first year ($10,000), and the cost
of annual software upgrades ($5,000).
The costs of renting hosted software are the rental fees ($2500 annually per user), implementation and
customization costs ($12,000 in the first year), and training ($10,000 in the first year).
Question 5:
Address the following issues:
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Use your spreadsheet software to calculate the total cost of renting or purchasing this software
over a three-year period. Identify the lowest-price alternative that meets Dirt Bikes’s
requirements.
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What other factors should Dirt Bikes consider besides cost in determining whether to rent or buy
the hardware and software?
3.6. Improving Decision Making: Redesigning the Customer Database
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Software skills: Database design; querying and reporting
Business skills: Customer profiling
Dirt Bikes USA sells primarily through its distributors. It maintains a small customer database with the
following data: customer name, address (street, city, state, zip code), telephone number, model purchased,
date of purchase, and distributor. You can find the database on the Laudon Web site for Chapter 6.
These data are collected by its distributors when they make a sale and are then forwarded to Dirt Bikes.
Dirt Bikes would like to be able to market more aggressively to its customers.
The Marketing Department would like to be able to send customers e-mail notices of special racing events
and of sales on parts. It would also like to learn more about customers’ interests and tastes: their ages,
years of schooling, another sport in which they are interested, and whether they attend dirt bike racing
events. Additionally, Dirt Bikes would like to know whether customers own more than one motorcycle.
(Some Dirt Bikes customers own two or three motorcycles purchased from Dirt Bikes USA or other
manufacturer.) If a motorcycle was purchased from Dirt Bikes, the company would like to know the date
of purchase, model purchased, and distributor. If the customer owns a non–Dirt Bikes motorcycle, the
company would like to know the manufacturer and model of the other motorcycle (or motorcycles) and
the distributor from whom the customer purchased that motorcycle.
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Question 6:
Address the following issues:
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Redesign Dirt Bikes’s customer database so that it can store and provide the information needed
for marketing. You will need to develop a design for the new customer database and then
implement that design using database software. Consider adding new columns into your exisiting
table and using multiple tables in your new design. Populate each new table with 10 records.
Make up some data when necessary (e.g. Education level, repeat Dirt Bikes purchases and nonDirt Bikes purchases …)
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Develop several reports that would be of great interest to Dirt Bikes’s marketing and sales
department (for example, lists of repeat Dirt Bikes customers, Dirt Bikes customers who attend
racing events, or the average ages and years of schooling of Dirt Bikes customers) and print them.
3.7. Improving Operational Excellence: Identifying Supply Chain Management
Solutions
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Software skills: Web browser and presentation software
Business skills: Locating and evaluating suppliers
In this project you’ll use the Web to identify the best suppliers for one component of a dirt bike and
appropriate supply chain management software for a small manufacturing company.
A growing number of Dirt Bikes orders cannot be fulfilled on time because of delays in obtaining some
important components and parts for its motorcycles, especially their fuel tanks. Complaints are mounting
from distributors who fear losing sales if the dirt bikes they have ordered are delayed too long.
Question 7:
Dirt Bikes’s management has asked you to help it address some of its supply chain issues.
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Use the Internet to locate alternative suppliers for motorcycle fuel tanks. Identify two or three
suppliers. Find out the amount of time and cost to ship a fuel tank (weighing about five pounds)
by ground (surface delivery) from each supplier to Dirt Bikes in Carbondale, Colorado. Which
supplier is most likely to take the shortest amount of time and cost the least to ship the fuel tanks?
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Dirt Bikes’s management would like to know if there is any supply chain management software
for a small business that would be appropriate for Dirt Bikes. Use the Internet to locate two
supply chain management software providers for companies such as Dirt Bikes [Reference:
http://www.capterra.com/supply-chain-management-software]. Briefly describe the capabilities of
the two software applications and indicate how they could help Dirt Bikes. Which supply chain
management software product would be more appropriate for Dirt Bikes? Why?
3.8. Achieving Operational Excellence: Developing an E-Commerce Strategy
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Software skills: Web browser software, Web page development software
Business skills: Strategic analysis
This project provides an opportunity for you to develop an e-commerce strategy for a real-world business
and to use a Web page development tool to create part of the company’s Web site.
Dirt Bikes’s management believes that the company could benefit from e-commerce. The company has
sold motorcycles and parts primarily through authorized dealers. Dirt Bikes advertises in various
magazines catering to dirt bike enthusiasts and maintains booths at important off-road motorcycle racing
events.
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Question 8:
You have been asked to explore how Dirt Bikes could benefit from e-commerce and a Dirt Bikes Web
site. Address the following issues:
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How could Dirt Bikes benefit from e-commerce? Should it sell motorcycles or parts over the Web?
Should it use its Web site primarily to advertise its products and services? Should it use the Web for
customer service?
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How would a Web site provide value to Dirt Bikes? Use the Web to research the cost of an ecommerce site for a small to medium-sized company. How much revenue or cost savings would the
Web site have to produce to make it a worthwhile investment for Dirt Bikes?
(Reference:
http://www.ecornerstoresplus.com.au/epages/ecornerdemo1.sf/?ObjectPath=/Shops/ecornerstoresplus/Categories/tips/ecommerce_costs
http://www.earlyimpact.com/productcart/ecommerce-cost-calculator.asp?submit=#calculator)
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Prepare specifications describing the functions that should be performed by Dirt Bikes’s Web site.
Include links to other Web sites or other systems in your specifications.
3.9. Achieving Operational Excellence: Identifying Opportunities for Knowledge
Management
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Software skills: Web browser software, presentation software
Business skills: Knowledge management strategy formulation
This project provides an opportunity for you to identify opportunities for knowledge management at a
real-world business and to suggest value-adding knowledge management applications.
Question 9:
Senior management has started reading about knowledge management and has asked you to explore
opportunities for improving knowledge management at Dirt Bikes. Address the following issues.
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What are the most important knowledge assets at Dirt Bikes? What functions and employee
positions are responsible for creating, distributing, and using these knowledge assets? Are all of
these assets explicit knowledge?
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What knowledge outside the organization (i.e. not from employees and internal knowledge base)
is required by the company?
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How could the following employee groups benefit from knowledge management: designers and
engineers, product development specialists, marketing specialists, sales department staff and
representatives and managers. Refer to specific tools to answer this question (e.g. Web search,
word processing, email, CAD, intra/extranets, AI systems …). Use the Web to research which
knowledge management systems are appropriate for Dirt Bikes and what information would these
systems provide? (Reference: http://www.capterra.com/knowledge-management-software/).
3.10. Improving Decision Making: Analyzing the Impact of Component Price
Changes
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Software skills: Spreadsheet formulas, two-variable data table
Business skills: Manufacturing bill of materials sensitivity analysis
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
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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.
Question 10:
Address the following issues.
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Complete the bill of materials by calculating the extended cost of each component and the total
materials cost for each brake system.
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Develop a sensitivity analysis 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.
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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.
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