Value-Chain Analysis Sheldon Radio manufactures yacht radios, navigational equipment, anddepth-sounding and related equipment from a small plant near New Bern, North Carolina. One ofSheldon’s most popular products, making up 40% of its revenues and 35% of its profits, is a marineradio, model VF4500, which is installed on many of the new large boats produced in the UnitedStates. Production and sales average 500 units per month. Sheldon has achieved its success in themarket through excellent customer service and product reliability. The manufacturing process consists primarily of the assembly of components purchased from various electronics firms plus a smallamount of metalworking and finishing. The assembly operations cost $110 per unit. The purchasedparts cost Sheldon $250, of which $130 is for parts that Sheldon could manufacture in its existingfacility for $80 in materials for each unit plus an investment in labor and equipment that would cost$35,000 per month.Sheldon is considering outsourcing the marketing, distributing, and servicing for its units toanother North Carolina firm, Brashear Enterprises. This would save Sheldon $125,000 in monthlymaterials and labor costs. The cost of the contract would be $105 per radio.Required1. Prepare a value-chain analysis for Sheldon to assist in deciding whether to purchase or manufacture theparts and whether to contract out the marketing, distributing, and servicing of the units.2. Should Sheldon (a) continue to purchase the parts or manufacture them and (b) continue to provide themarketing, distributing, and servicing or outsource these activities to Brashear? Explain your answer.
Value-Chain Analysis Sheldon Radio manufactures yacht radios, navigational equipment, and
depth-sounding and related equipment from a small plant near New Bern, North Carolina. One of
Sheldon’s most popular products, making up 40% of its revenues and 35% of its profits, is a marine
radio, model VF4500, which is installed on many of the new large boats produced in the United
States. Production and sales average 500 units per month. Sheldon has achieved its success in the
market through excellent customer service and product reliability. The manufacturing process consists primarily of the assembly of components purchased from various electronics firms plus a small
amount of metalworking and finishing. The assembly operations cost $110 per unit. The purchased
parts cost Sheldon $250, of which $130 is for parts that Sheldon could manufacture in its existing
facility for $80 in materials for each unit plus an investment in labor and equipment that would cost
$35,000 per month.
Sheldon is considering outsourcing the marketing, distributing, and servicing for its units to
another North Carolina firm, Brashear Enterprises. This would save Sheldon $125,000 in monthly
materials and labor costs. The cost of the contract would be $105 per radio.
Required
1. Prepare a value-chain analysis for Sheldon to assist in deciding whether to purchase or manufacture the
parts and whether to contract out the marketing, distributing, and servicing of the units.
2. Should Sheldon (a) continue to purchase the parts or manufacture them and (b) continue to provide the
marketing, distributing, and servicing or outsource these activities to Brashear? Explain your answer.
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