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FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Myers Inc. manufactures biodegradable bottles. Since this is a patented method of producing environmentally-friendly plastic, they cannot use an overseas contractor. They will make the products in the United States. What criteria would you use to assess their business model? O The production expertise scale will tell if the company is ready to partake in such a venture. O The fixed costs need to be compared to other similar companies in the U.S. The standardization of the product is making it more expensive to produce, as the copyrights are implemented. O Since the product will be outsourced, the manager needs to assess the simplicity of the supply chain. Even though the manufacturing costs are high, the transportation costs will be low. O The minimum efficient scale will tell the minimum volume they need to produce to reach economies of scale. The quality of the in-house product needs to be constantly inspected, as they will not use outside sourcing.
Transcribed Image Text:Myers Inc. manufactures biodegradable bottles. Since this is a patented method of producing environmentally-friendly plastic, they cannot use an overseas contractor. They will make the products in the United States. What criteria would you use to assess their business model? O The production expertise scale will tell if the company is ready to partake in such a venture. O The fixed costs need to be compared to other similar companies in the U.S. The standardization of the product is making it more expensive to produce, as the copyrights are implemented. O Since the product will be outsourced, the manager needs to assess the simplicity of the supply chain. Even though the manufacturing costs are high, the transportation costs will be low. O The minimum efficient scale will tell the minimum volume they need to produce to reach economies of scale. The quality of the in-house product needs to be constantly inspected, as they will not use outside sourcing.
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