Draft a one and a half-page memo to your CEO, in bullet format, advising her of the different cost and productivity issues involved in the decision of (a) moving part of the production abroad, and (b) choosing the same technology abroad as they do in the U.S.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

The manager of a microchip (chip for short) manufacturing firm can choose from various production technologies and must determine whether or not to

(a) move part of their production to a foreign plant, and

(b) use the same technology in their foreign plant that they use in their domestic plant.

 

Chip manufacturers can produce using either sophisticated equipment and relatively few workers (prevalent choice in the US) or many workers and less complex equipment (prevalent choice abroad).

 

U.S. chip firms have been moving much of their production abroad for many years. Worldwide sales of chips made in the U.S. dropped from 66% in 1976 to 34% in 1998, and to 17% in 2011, then rose slightly to 21% in early 2015.

 

U.S. chip firms moved their production abroad because of lower taxes, lower labor costs, and capital grants provided by foreign governments. These grants reduce the cost of operating a foreign facility by as much as 25%, compared to the costs of running a U.S. plant. However, in 2012, China, Thailand, and other Asian countries substantially raised their minimum wages, which reduces the incentive of U.S. firms to move production to those locations.

 

Draft a one and a half-page memo to your CEO, in bullet format, advising her of the different cost and productivity issues involved in the decision of

(a) moving part of the production abroad, and

(b) choosing the same technology abroad as they do in the U.S.  

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Goals and Objectives
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education