Steel Vs Titanium: Issue: DDL is considering switching its seatbelt material from Titanium to Steel as a potential cost savings measure. Analysis: DDL completed a customer survey as part of its warranty registration process and uncovered that majority of its customers responded that the hooks and buckles made out of titanium wasn’t a factor in their buying decision. As provided in the attached excel sheet tab “steel versus titanium” the curent contibution margin per unit is $63. Should DDL proceed to change its material to steel and reduce its selling price to $178 the contribution margin increases to $82 due to reduction in the total variable costs. Recommendation: I recommend that DDL should change its material to Steel as a potential cost savings measure. Dog Crates: Issue: DDL is considering adding a new product Dog Crates and has two options either to manufacture the crates or to purchase them from another manufacturer. Analysis: DDL would have a higher contribution margin per unit if the crates are manufactured in house. However, the case facts indicate that DDL would incur additional costs of $55000 annually in advertising and selling expense for the new product. The new product will also restrain the production capacity for its current product. Recommendation: I recommend that DDL should not expand into the dog crates product the reason being, expansion into the dog crates product does not align with the company’s mission to provide a functional, safe and fashionable travel accessory for dogs. The case facts indicate that dogs in crates sustain injuries 25% of the time when in motor accidents. The expansion into the dog crates segment also doesn’t align with the company’s vision where dogs are always included as a member of the family as the dog in crates would mean that they are isolated in the rear of the vehicle.
