1) An American Company that sells consumer electronics products has manufacturin
ID: 1178255 • Letter: 1
Question
1) An American Company that sells consumer electronics products has manufacturing facilities in Mexico, Taiwan, and Canada. The average hourly wage, output, and annual overhead cost for each site are as follows: Mexico Taiwan Canada Hourly wage rate $1.50 $3.00 $6.00 Output per person 10 18 20 Fixed overhead cost $150,000 $90,000 $110,000 a. Given these figures, is the firm currently allocating its production resources optimally? b. If not, what should it do? (Consider output per person as a proxy for marginal product). Suppose the firm wants to consolidate all its manufacturing into one facility. Where should it locate? Explain.
Explanation / Answer
The output per person is assessed
poduction is less than 3,600,000 units Taiwan is a better location else Mexico is a better location.
The break even quantity between Mexico and Canada
0.15x+150000 = 0.30x+110000
x=(150000-110000)/(0.30-0.15)=266,667 units
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