BA5001 / BA5001X    Business Decision-Making Final coursework: Lamberts Heating Submission date:               Friday 24 th May 2013 This coursework is worth 40% of your final mark for this module. Scenario Lamberts Heating has two main divisions: one manufacturing radiators and the other installation of central heating systems. The manufacturing arm of the company makes radiators for domestic and commercial central heating systems.  These radiators are either used by Lamberts installation division or are sold to other central heating installation companies. Lamberts Heating has rather old machinery, presently used to manufacture the radiators, that it wants to replace. The company wants both the new machinery to be in place as soon as possible and to plan the procurement and installation as soon as possible. The company has yet to decide which piece of new machinery to buy and thus does not expect to make an order for this machinery before 3rd June 2013. Lamberts Heatings installation division supplies and fits domestic central heating systems. It uses its own radiators to obtain the materials for this, but buys in boilers and pipes from other companies. This company is keen to increase its profit margin in this division but the business of supplying domestic heating systems is very competitive at present. The company has decided that the best way to increase its profit margin is to reduce the cost of buying the boilers from a number of suppliers. It has conducted some research into the prices charged by three major suppliers: Apex Boilers, Brunswich Heating Supplies and Centrale. Tasks This coursework is in three parts. You should submit all three parts together as one document. The first part of the document will consist of three reports : one for each part of the coursework with three appendices. These appendices will contain all the details for the work you have completed in order to write the reports. All computer input and output should also be in the appendices, as should the details of any other calculations you have made. Part A: Planning and control of capital expenditure Question / Tasks :  The senior management of the Lamberts Heating are considering the replacement of one of the firm’s machines that is used to make radiators in the factory. You are one of the managers involved in this decision. You have had some discussions with other members of the senior management about this proposed investment and there appear to be three machines that the firm could purchase. Either a: 1. Alumier machine , a straight replacement for the present machine from the same supplier 2. Big EZ machine from an American supplier 3. Cial machine from Japan The senior management team wish to carefully consider the alternatives. As a first step, it was decided to accurately estimate each of the alternative’s cash flows and the following estimated figures are available: Alumier Big EZ Cial      Machine Machine Machine  .

1. BA5001 / BA5001X Business Decision-Making
Final coursework:
Lamberts Heating
Submission date: Friday 24
th
May 2013
This coursework is worth 40% of your
final
mark for this module.
Scenario
Lamberts Heating has two main divisions: one manufacturing
radiators and the other installation of central heating systems.
The manufacturing arm of the company makes radiators for
domestic and commercial central heating systems. These
radiators are either used by Lamberts installation division or are
sold to other central heating installation companies. Lamberts
Heating has rather old machinery, presently used to manufacture
the radiators, that it wants to replace. The company wants both
the new machinery to be in place as soon as possible and to plan
the procurement and installation as soon as possible. The
company has yet to decide which piece of new machinery to buy
and thus does not expect to make an order for this machinery
before 3rd June 2013.
Lamberts Heatings installation division supplies and fits
domestic central heating systems. It uses its own radiators to
obtain the materials for this, but buys in boilers and pipes from
other companies. This company is keen to increase its profit
margin in this division but the business of supplying domestic
heating systems is very competitive at present. The company
has decided that the best way to increase its profit margin is to

2. reduce the cost of buying the boilers from a number of
suppliers. It has conducted some research into the prices
charged by three major suppliers: Apex Boilers, Brunswich
Heating Supplies and Centrale.
Tasks
This coursework is in three parts. You should submit all three
parts together as one document.
The first part of the document will consist of three
reports
: one for each part of the coursework with three appendices.
These appendices will contain all the details for the work you
have completed in order to write the reports. All computer input
and output should also be in the appendices, as should the
details of any other calculations you have made.
Part A:
Planning and control of capital expenditure
Question / Tasks
:
The senior management of the Lamberts Heating are considering
the replacement of one of the firm’s machines that is used to
make radiators in the factory. You are one of the managers
involved in this decision. You have had some discussions with
other members of the senior management about this proposed
investment and there appear to be three machines that the firm
could purchase.
Either a:
1.
Alumier
machine
, a straight replacement for the present machine from the same
supplier

3. 2.
Big EZ
machine from an American supplier
3.
Cial
machine from Japan
The senior management team wish to carefully consider the
alternatives. As a first step, it was decided to accurately
estimate each of the alternative’s cash flows and the following
estimated figures are available:
Alumier
Big EZ
Cial
Machine
Machine
Machine
£
£
£
Initial Outlay

4. 500,000
500,000
500,000
Cash inflows
Year 1
50,000
200,000
150,000
2
100,000
150,000
150,000
3
150,000
150,000
150,000
4
150,000
50,000
150,000
5

5. 150,000
25,000
100,000
6
170,000
25,000
50,000
770,000
600,000
750,000
The other members of the management team have asked you to
consider each of the above alternatives, using the various
methods usually employed in appraisal of capital investment
decisions. You have been asked to report back to the whole
team at their next meeting. Whilst other members at this
meeting are also aware of usual investment appraisal methods,
your report is expected to assess the above alternatives in any
way that you consider is appropriate. Your report will be
expected to include your recommendation of the machine to
purchase, a recommendation that the team can then consider at
their next meeting. Your report will also be expected to include
an explanation of the strengths and weaknesses of the various

6. methods that you have utilised in your investment appraisal. A
10% discount rate has also been recommended, the yield for
each machine is expected to be calculated separately, and it is
acceptable for all calculations to be worked out on a pre-tax
basis.
(
50 Marks
)
Note
:
1.
All references and books, etc., consulted must be included,
including any internet sites used.
2.
You are also expected to produce this assignment using
information technology. Particularly expected for this part of
the assignment would be the use of Microsoft Word and Excel,
or the use of other similar word-processing and spreadsheet
software to produce this coursework.
A successful assignment (in Part A of this assignment) might
include consideration or explanation of:
§
consideration of each of the alternative proposals under at least
three methods of evaluating capital investment decisions
§
comparison of the inflows and outflows for each machine under
each method
§

7. the objective(s) of each method
§
the advantages and disadvantages (strengths and weaknesses) of
each of these methods
§
consideration of any non-financial factors which may have to be
considered
§
consideration of any other information you may require
§
a recommendation of one of the proposals, including the reasons
for your recommendation
§
use of the expected word-processing and spreadsheet software
Note:
The above is illustrative, covering only the main points of the
assignment.
Suggested length: 1,250 words
This part of the assignment (Part A) represents 50% of your
marks on
this
piece of coursework
Part B: Scheduling the installation of the new machinery
Having decided to buy a new piece of machinery to make the
radiators, Lambert Heating now has to consider the timeframe
for getting the new piece of machinery up and running. This
will involve you developing the project plan in terms of
determining the critical path and the sequencing of the relevant
activities.

8. The activities involved are shown in the table below with their
preceding activities and their normal durations. Some of the
activities can be reduced in time by using extra staff but this is
at an extra cost. The minimum duration for each activity is
shown in the final column. For a number of activities, the
minimum duration is the same as the normal duration as the
duration of these activities cannot be reduced.
The earliest that the company expects to start the process is
Monday 3
rd
June 2013
Activity
Normal Duration in weeks
Preceding activity
Minimum Duration
[Each day saved cost £200]
A:
Order new machinery
2
None
2
B:
Plan new physical layout of factory
3
None
3
C:
Determine changes needed in existing machinery
3
None
3
D
Receive new equipment
10
A

9. 8
E
Hire new employee to supervise the operation of the new
machinery
7
A
6
F
Make changes needed to accommodate new machinery
15
B
13
G:
Make changes needed in existing machinery
9
C
7
H:
Train existing employees to use new machinery
7
D,E
6
I:
Install new machinery
4
F
3
J:
Disassemble old machinery
5
G
4
K:
Conduct employee safety training on new installation
2
H,I

10. 2
Please note that the company works a 5 day week: Monday to
Friday
.
Task:
Appendix
You may complete this task manually or by using MS project.
·
Assuming that the project starts on Monday 3rd
June
2013, determine the shortest duration for the entire project,
using the normal duration times. Specify the date at which the
project can finish and the number of weeks required.
·
Produce a Gantt chart showing the starting and finishing times
of each activity
·
Identify which activities form the critical path(s) of the project.
·
If the project could be speeded up by a maximum of 3 weeks at
a cost of £200 a day, where should this money be spent?
Produce a new network diagram to show the new critical
path(s) and total duration.
Report
Give details of the proposed calendar of works, making it clear
which activities are critical and which activities have some
slack. This section should be written so that the management
can understand the advice being given without reference to the
work in the appendix. Give details of the starting date, the

11. finishing date and the duration of the project.
Explain how, by spending more money, the project duration can
be shortened. Explain which activities have been shortened and
which activities are now critical. Give details of the starting
date, the finishing date and the duration of the project. Give
details of the extra cost involved in shortening the project.
A successful assignment (Part B of this assignment) should
include:
§
Determining the shortest time in which the project can be
completed using the “normal” durations
§
Determining the shortest time in which the project can be
completed using the “minimum” durations
§
Producing a well-written, well-structured report that enables
management to understand how to schedule the project. This
report should include details of activities which must be
completed on time and those for which there is some slack.
§
The costs of shortening the project time should be included in
the report as should the relevant start and finishing dates.
Note:
The above is illustrative, covering only the main points of the
assignment.
Suggested length: 500 words
This part of the assignment (Part B) represents 20% of your
marks on this piece of coursework.

12. Part C: Cost of procuring boilers
This part of the coursework requires you to use linear
programming techniques to determine the best way to minimise
the cost of supplying boilers to Lamberts Heating
As well as manufacturing radiators (as mentioned in Part A),
Lamberts Heating is also reviewing the way it procures boilers
to enable the installation of domestic heating systems.
The purchasing department has identified three possible
suppliers of boilers; Apex, Brunswich and Centrale. It has also
identified five kinds of domestic boiler that it wants to purchase
so it can supply and fit these boilers to a variety of sizes of
homes.
The five boilers are known
and
coded by Italian numbers as most are manufactured in Italy ;
Uno (1), Duo (2), Tre (3), Quattro (4) and Cinque (5).
The table below gives the cost of each boiler (in £s) from each
supplier. The final row of the table specifies the minimum
requirement of each type of boiler per year. Please note that not
all boilers are available from each supplier.
Uno
Duo
Tre
Quattro
Cinque
Apex
500
750
300
---
450
Brunswich
---

13. 725
320
875
420
Centrale
480
775
310
900
---
Requirement
(number of boilers)
2000
1500
3000
2500
2200
There are certain limitations that have to be taken into account;
·
Apex can supply no more than 1,000 of the Tre boiler each year.
·
Brunswich can supply no more than 800 of the Duo boiler each
year.
·
Centrale can supply no more than 1,800 Uno boilers each year.
Lamberts Heating wants to meet its requirement for the number
of boilers needed each year at the minimum cost.

14. Task
You are expected to use MS Excel software for this task.
However, we will accept printouts from any other Linear
Programming software
.
Appendix
·
Define the meaning of any decision variables you are using.
·
Formulate the situation described above as a linear
programming problem.
·
Include your computer input of the problem (and show any
formulae used)
·
Include the “Answer Report” and “Sensitivity Report” printouts
Report
Write a brief report to the management of Lambert Heating
detailing the cheapest way of meeting their need for boilers.
This report, written in a formal style of English, should include:
·
The nature of the problem being solved
·
The suggested purchasing plan
·
The cost of the suggested purchasing plan.
·
The robustness of the plan. Provide details of the ranges of

15. costs of boilers from each suggested supplier for which your
suggested plan remains optimal, and advise the company when
they will have to generate a new plan. Do not just provide lists
but consider your answers in the context of the question.
·
At present, Apex can supply no more than 1,000 of the Tre
boiler each year. If this limit was changed so that Apex could
now supply 1,100 Tre boilers, explain what effect this would
have on the total minimum cost?
A successful assignment (for Part C of this assignment) should
include:
§
Well-defined decision variables and a correct formulation of the
problem.
§
Appropriate use of Excel (or other software) to produce a
solution to the problem.
§
Producing a well-written, well-structured report that enables
management to understand how to procure boilers at the
minimum price. This report should include details of your
suggested purchasing plan and the cost of this plan.
§
The advice to management should also enable them to determine
the range of prices for each boiler for which your purchasing
plan is valid.
§
The implications of the increased capacity to supply by Apex
should be clearly described.

16. Note:
The above is illustrative, covering only the main points of the
assignment.
Suggested length: 500 words
This part of the assignment (Part C) represents 30% of your
marks on this piece of coursework.