CNR Computer is considering moving some of its operations overseas in order to reduce labour costs. In the United Kingdom, its main circuit board costs CNR Computer £75 per unit to produce, while overseas it costs only £65 to produce. Holding costs are based on a 20 percent annual interest rate, and the demand has been a fairly steady 200 units per week. Assume that setup costs are £200 both locally and overseas. Production lead times are one month locally and six months overseas. Approximate the average annual costs of production, holding, and setup at each location, assuming that an optimal solution is employed in each case. Based on this information, which location is preferable?
CNR Computer is considering moving some of its operations overseas in order to reduce labour costs. In the United Kingdom, its main circuit board costs CNR Computer £75 per unit to produce, while overseas it costs only £65 to produce. Holding costs are based on a 20 percent annual interest rate, and the demand has been a fairly steady 200 units per week. Assume that setup costs are £200 both locally and overseas. Production lead times are one month locally and six months overseas. Approximate the average annual costs of production, holding, and setup at each location, assuming that an optimal solution is employed in each case. Based on this information, which location is preferable?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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CNR Computer is considering moving some of its operations overseas in order to reduce labour costs. In the United Kingdom, its main circuit board costs CNR Computer £75 per unit to produce, while overseas it costs only £65 to produce. Holding costs are based on a 20 percent annual interest rate, and the demand has been a fairly steady 200 units per week. Assume that setup costs are £200 both locally and overseas. Production lead times are one month locally and six months overseas. Approximate the average annual costs of production, holding, and setup at each location, assuming that an optimal solution is employed in each case. Based on this information, which location is preferable?
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