Task 2B: Critically evaluate the hey benefits and limitations of each of the differing investment appraisal techniques, supporting this response with relevant academic research as to whether each of the differing techniques is applied in practice within a real-life business context. Unilever PLC planning to meet the environmental protection strategy including an introduction of the UN approved 120-litre plastic open-top drums, known as the ‘Blue-drum’. It was highlighted in 2022 AGM that Comfort’ one of their products delivered high growth in Latin America, South Asia, and Turkey, but declined in Europe where consumers reduced their spending in the category. Hence, the company is trying to reduce cost in producing plastic containers used for this washing detergent product, ‘Comfort’. Assume that cost of manufacturing a ten-pack of Blue-drum includes direct material at C19, direct labour is 111 and variable overheads at f3. The depreciation of a special equipment is C7 with no resale value, supervisors' wages is C6. Including the general factory overheads which is allocated based on direct labour hours, the total cost manufactuiing is C55 per a drum, based on 20,000 packs of drum produced each year. However, an external supplier, unlisted PLC has offered to provide the same quantity at f45 per drum. Task 2C: Critically discuss factors that Blue-drum PLC should consider choosing between the making or buying of the Blue-drums’. Task 2D: You are also required to critically evaluate three relevant factors to be considered for suitable sources of finance to fund the Blue-drum investment compared to the unlisted PLC supplier of plastic Blue-drum.
Task 2B:
Critically evaluate the hey benefits and limitations of each of the differing investment appraisal techniques, supporting this response with relevant academic research as to whether each of the differing techniques is applied in practice within a real-life business context.
Unilever PLC planning to meet the environmental protection strategy including an introduction of the UN approved 120-litre plastic open-top drums, known as the ‘Blue-drum’. It was highlighted in 2022 AGM that Comfort’ one of their products delivered high growth in Latin America, South Asia, and Turkey, but declined in Europe where consumers reduced their spending in the category. Hence, the company is trying to reduce cost in producing plastic containers used for this washing detergent product, ‘Comfort’.
Assume that cost of manufacturing a ten-pack of Blue-drum includes direct material at C19, direct labour is 111 and variable overheads at f3. The
resale value, supervisors' wages is C6. Including the general factory overheads which is allocated based on direct labour hours, the total cost manufactuiing is C55 per a drum, based on 20,000 packs of drum produced each year. However, an external supplier, unlisted PLC has offered to provide the same quantity at f45 per drum.
Task 2C:
Critically discuss factors that Blue-drum PLC should consider choosing between the making or buying of the Blue-drums’.
Task 2D:
You are also required to critically evaluate three relevant factors to be considered for suitable sources of finance to fund the Blue-drum investment compared to the unlisted PLC supplier of plastic Blue-drum.
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