An American company that sells consumer electronics products has manufacturing f

Question

An American company that sells consumer electronics products has manufacturing facilities in Mexico, Taiwan, and Canada. The average hourly wage, output per person (used as a proxy for marginal product in this problem), and overhead cost for each site are as follows:



Hourly Wage Rate


$ 1.50-Mexico


$3.00-Taiwan


$6.00-Canada

Output per Person


10-Mexico


18-Taiwan


20-Canada

Fixed Overhead Cost


$150,000-Mexico


$90,000-Taiwan


$110,000-Cananda


A. Given these figures, is the firm currently allocating its production resources optimally? If not, what should it do and why? Show all your calculations.

B. Suppose the firm wants to consolidate all its manufacturing into one facility. Where should it locate? Explain. An American company that sells consumer electronics products has manufacturing facilities in Mexico, Taiwan, and Canada. The average hourly wage, output per person (used as a proxy for marginal product in this problem), and overhead cost for each site are as follows:



Hourly Wage Rate


$ 1.50-Mexico


$3.00-Taiwan


$6.00-Canada

Output per Person


10-Mexico


18-Taiwan


20-Canada

Fixed Overhead Cost


$150,000-Mexico


$90,000-Taiwan


$110,000-Cananda


A. Given these figures, is the firm currently allocating its production resources optimally? If not, what should it do and why? Show all your calculations.

B. Suppose the firm wants to consolidate all its manufacturing into one facility. Where should it locate? Explain.

Explanation / Answer

a. more to Mexico or possibly Taiwan
b. either Mexico or Taiwan (Taiwan has lower MP/P but also lower overhead)

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.