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11-36 International outsourcing. Riverside Clippers Corp manufactures garden tools in a factory in Taneytown, Maryland Recently, the company designed a collection of tools for professional
11-36 International outsourcing. Riverside Clippers Corp manufactures garden tools in a factory in Taneytown, Maryland Recently, the company designed a collection of tools for professional use rather than consumer use. Management needs to make a good decision about whether to produce this line in their existing space in Maryland, where space is available or to accept an offer from a manufacturer in Taiwan. Data concerning the decision are Expected annual sales of tools (in units) Average selling price of tools Price quoted by Taiwanese company, in New Taiwanese Dollars (NTD) Current exchange rate Variable manufacturing costs Incremental annual fixed manufacturing costs associated with the new product line Variable selling and distribution costsa Annual fixed selling and distribution costsa 800,000 $12 175 35NTD1S $4.75 per unit $400,000 $1 per unit $220,000 a Selling and distribution costs are the same regardless of whether the tools are manufactured in Maryland or imported 1. Should Riverside Clippers Corp manufacture the 800,000 garden tools in the Maryland facility or purchase them from the supplier in Taiwan? Explain
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