Recently, Abercrombie & Fitch (A&F) began shifting a large poPLION costs have been cut dramatically, but shipment times have gone from days to weeks. In addition to having less control over inventoly fashion changes, the holding costs have risen for the goods in transport. Meanwhile, Central America might offer an inexpensive manufacturing alternative that mic reduce shipping time through the Panama Canal to, say, 8 days, compared to, say, 25 days from Asia. Suppose that A&F uses an annual holding rate 30%. Suppo further that the product costs $20 to produce in Asia. Assuming that the transportation cost via ocean linear would be approximately the same whether coming fro Asia or Central America, what would the maximum production cost in Central America need to be in order for that to be a competitive source compared to the Asiar producer? The maximum production cost in Central America should be $ (round your response to two decimal places).

Recently, Abercrombie & Fitch (A&F) began shifting a large poPLION costs have been cut dramatically, but shipment times have gone from days to weeks. In addition to having less control over inventoly fashion changes, the holding costs have risen for the goods in transport. Meanwhile, Central America might offer an inexpensive manufacturing alternative that mic reduce shipping time through the Panama Canal to, say, 8 days, compared to, say, 25 days from Asia. Suppose that A&F uses an annual holding rate 30%. Suppo further that the product costs $20 to produce in Asia. Assuming that the transportation cost via ocean linear would be approximately the same whether coming fro Asia or Central America, what would the maximum production cost in Central America need to be in order for that to be a competitive source compared to the Asiar producer? The maximum production cost in Central America should be $ (round your response to two decimal places).

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The XYZ Manufacturing Company is evaluating options for spending on product quality and wants to find the optimal amount to spend on changing its processes to further prevent defects. Its engineers have developed the following estimates: 1. Defects The current defect rate is 10%. If it invests an additional $10 per unit in prevention costs, the defect rate will drop to 6%; spending $20 per unit on prevention drops the defect rate to 3%; spending $30 per unit drops the defect rate to 1.5%; and investing $40 per unit on prevention reduces the defect rate to 1%. 2. Inspection Inspection costs are $5 per unit. Inspection is successful at detecting 98% of defective units; the remaining 2% of defective products are sold and eventually returned for warranty repairs or replacement at no cost to the customer. 3. Internal failure costs are $400 per defective unit that is detected. 4. External failure costs are $1000 per unit returned. 5. Current production level is 1 million units. REQUIRED: A.…
A bicycle manufacturer currently produces 237,000 units a year and expects output levels to remain steady in the future. It buys chains from an outside supplier at a price of $2.20 a chain. The plant manager believes that it would be cheaper to make these chains rather than buy them. Direct in-house production costs are estimated to be only $1.60 per chain. The necessary machinery would cost $293,000 and would be obsolete after 10 years. This investment could be depreciated to zero for tax purposes using a 10-year straight-line depreciation schedule. The plant manager estimates that the operation would require $44,000 of inventory and other working capital upfront (year 0), but argues that this sum can be ignored since it is recoverable at the end of the 10 years. Expected proceeds from scrapping the machinery after 10 years are $21,975. If the company pays tax at a rate of 35% and the opportunity cost of capital is 15%, what is the net present value of the decision to produce the…
"We ought to stop making our own drums and accept that outside supplier's offer," said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. "At a price of $21 per drum, we would be paying $7.05 less than it costs us to manufacture the drums in our own plant. Because we use 65,000 drums a year, that equals an annual cost savings of $458,250." Antilles Refining's current cost to manufacture one drum is given below (based on 65,000 drums per year): Direct materials Direct labor Variable overhead Fixed overhead ($3.50 general company overhead, $1.95 depreciation, and $0.90 supervision) Total cost per drum A decision about whether to make or buy the drums is especially important at this time because the equipment used to make the drums is completely worn out and must be replaced. The choices facing the company are: Alternative 1: Rent new equipment and continue to make the drums. The equipment would be rented for $175,500 per year. Alternative 2: Purchase the drums from an…
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The board of directors decided to pay 50 percentof the firm’s $460,000 earnings in dividendsto the stockholders. The firm has retainedearnings of $680,000 on the books. After thedividends are paid, which of the followingstatements is true about the firm’s retainedearnings account?a. The new value of the firm’s retained earningsis $910,000.b. The new value of the firm’s retained earningsis $450,000.c. The firm failed to reach its profit goal.d. Each shareholder will receive more than he orshe received last year.e. The firm’s retained earnings are too high.
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You are an industry analyst that specializes in an industry where the market inverse demand is P = 100 - 2Q. The external marginal cost of producing the product is MCExternal = 8Q, and the internal cost is MCInternal = 18Q.Instructions: Enter your responses rounded to the nearest two decimal places.a. What is the socially efficient level of output? unitsb. Given these costs and market demand, how much output would a competitive industry produce? unitsc. Given these costs and market demand, how much output would a monopolist produce? unitsd. Which of the following are actions the government could take to induce firms in this industry to produce the socially efficient level of output.Instructions: For correct answers place a check mark. check all that apply Nonrival consumptionunanswered Pollution taxesunanswered Pollution permitsunanswered
Barbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for its excellent quality and innovation. Recently, the firm conducted a relevant cost analysis of one of its product lines that has only two products, T-1 and T-2. The sales for T-2 are decreasing and the purchase costs are increasing. The firm might drop T-2 and sell only T-1. Barbour allocates fixed costs to products on the basis of sales revenue. When the president of Barbour saw the income statements (see below), he agreed that T-2 should be dropped. If T-2 is dropped, sales of T-1 are expected to increase by 10 percent next year, but the firm's cost structure will remain the same. Sales Variable costs: Cost of goods sold Selling & administrative Contribution margin Fixed expenses: Fixed corporate costs. Fixed selling and administrative Total fixed expenses Operating income Required: T-1 $ 200,000 70,000 20,000 $ 110,000 58,700 14,300 $ 73,000 T-2 $ 260,000 130,000 50,000 $ 80,000…
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