Whimsical Toys A US-based designer and manufacturer of wimsical, high quality, wooden toys is looking to expand manufacturing capacity to service its growing domestic demand. The company currently owns one manufacturing facility in North Carolina and is considering either building onto this facility or sourcing some of its production from Mexico. If it sources from Mexico, the company must further consider whether to own this facility or outsource this fraction of its production to another company. Labor cost as a % of total bill of materials cost at the North Carolina site is currently 30% for a typical wooden toy and the average wage of workers in the plant is $27/hour. The average wage of workers doing similar work in Mexico is $4.50/hour. If the labor costs remain the same as described above, what percent of product cost results in no cost difference between production in US and Mexico? a. 0% b. 18% c. 20% d. 22%

Whimsical Toys A US-based designer and manufacturer of wimsical, high quality, wooden toys is looking to expand manufacturing capacity to service its growing domestic demand. The company currently owns one manufacturing facility in North Carolina and is considering either building onto this facility or sourcing some of its production from Mexico. If it sources from Mexico, the company must further consider whether to own this facility or outsource this fraction of its production to another company. Labor cost as a % of total bill of materials cost at the North Carolina site is currently 30% for a typical wooden toy and the average wage of workers in the plant is $27/hour. The average wage of workers doing similar work in Mexico is $4.50/hour. If the labor costs remain the same as described above, what percent of product cost results in no cost difference between production in US and Mexico? a. 0% b. 18% c. 20% d. 22%

EBK HEALTH ECONOMICS AND POLICY

7th Edition

ISBN:9781337668279

Author:Henderson

Publisher:Henderson

Chapter4: Economic Evaluation In Health Care

Section: Chapter Questions

Problem 7QAP

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