CHAPTER 8 TECHNICAL CASE American Textile has the following issues to resolve to locate a new plant to manufacture towels for the growing US market In Vietnam, 6 laborers, each making $2 day, can produce 48 towels per day In the Philippines, 3 laborers, each making $5 day, can produce 50 towels per day In the Dominican Republic, 10 laborers, each making $2 day, can produce 80 towels per day In Tupelo, Mississippi, 2 laborers, each making $58 day, can produce 290 towels per day (Note All money is in equivalent US Dollars and all laborers are working an 8 hour day) Based on LABOR COSTS alone, which location would be the most economical to produce the towels and open a new plant Show your work, summarize in a paragraph, and provide your decision The production in Vietnam, the Philippines, and the Dominican Republic is labor intensive while Tupelo has some newer equipment to make production easier However, the education system in each country is different and repair costs for equipment vary by the education of the workforce and the ability to obtain spare parts So, the FIXED COSTS for all equipment, rent (building the only one owned by American Textile is in Tupelo, MS), and repair maintenance for each location per year includes LOCATION EQUIPMENT RENT REPAIR MAINT TOTAL FIXED COSTS Vietnam $20,000 $5,000 $95,000 Philippines $20,000 $7,500 $97,500 Dominican Republic $12,000 $12,000 $126,000 Tupelo, Mississippi $50,000 $0 00 $90,000 Calculate the TOTAL FIXED COSTS for each location then set up an equation for each showing TOTAL FIXED COSTS VARIABLE COSTS (in this instance LABOR COSTS PER UNIT only) and TOTAL COSTS based on 200,000 towels per year Draw a CROSSOVER CHART based on this number What is the best location to choose Calculate the TOTAL COSTS and the best location to manufacture towels if the total volume increases to 500,000, and 1,000,000 (this can be placed in a table show me your calculations) What is this telling us about the cost to manufacture If each towel is selling for $5 00 a piece, what is the TOTAL REVENUE at each location for 200,000, 500,000 and 1,000,000 towels Again, this can be placed into a table for easy presentation Is there a crossover point where it is better to move production based upon volume What does this tell us about global competition and what is needed for nations to compete What is the driving factor based solely upon this model What needs to change to make those who are not competitive more competitive Do they have an advantage if the market is North America and what is the advantage of one over another

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CHAPTER 8 TECHNICAL CASE American Textile has the following issues to resolve to locate a new plant to manufacture towels for the growing US market:

CHAPTER 8 TECHNICAL CASE

American Textile has the following issues to resolve to locate a new plant to manufacture towels for the growing US market:

In Vietnam, 6 laborers, each making $2/day, can produce 48 towels per day
In the Philippines, 3 laborers, each making $5/day, can produce 50 towels per day
In the Dominican Republic, 10 laborers, each making $2/day, can produce 80 towels per day
In Tupelo, Mississippi, 2 laborers, each making $58/day, can produce 290 towels per day

(Note: All money is in equivalent US Dollars and all laborers are working an 8-hour day)

Based on LABOR COSTS alone, which location would be the most economical to produce the towels and open a new plant? Show your work, summarize in a paragraph, and provide your decision.

The production in Vietnam, the Philippines, and the Dominican Republic is labor intensive while Tupelo has some newer equipment to make production easier. However, the education system in each country is different and repair costs for equipment vary by the education of the workforce and the ability to obtain spare parts. So, the FIXED COSTS for all equipment, rent (building the only one owned by American Textile is in Tupelo, MS), and repair/maintenance for each location per year includes:

LOCATION	EQUIPMENT	RENT	REPAIR/MAINT.	TOTAL FIXED COSTS
Vietnam	$20,000	$5,000	$95,000
Philippines	$20,000	$7,500	$97,500
Dominican Republic	$12,000	$12,000	$126,000
Tupelo, Mississippi	$50,000	$0.00	$90,000

Calculate the TOTAL FIXED COSTS for each location then set up an equation for each showing TOTAL FIXED COSTS + VARIABLE COSTS (in this instance LABOR COSTS PER UNIT only) and TOTAL COSTS based on 200,000 towels per year. Draw a CROSSOVER CHART based on this number. What is the best location to choose?
Calculate the TOTAL COSTS and the best location to manufacture towels if the total volume increases to 500,000, and 1,000,000 (this can be placed in a table show me your calculations). What is this telling us about the cost to manufacture?
If each towel is selling for $5.00 a piece, what is the TOTAL REVENUE at each location for 200,000, 500,000 and 1,000,000 towels? Again, this can be placed into a table for easy presentation.
Is there a crossover point where it is better to move production based upon volume?
What does this tell us about global competition and what is needed for nations to compete? What is the driving factor based solely upon this model? What needs to change to make those who are not competitive more competitive? Do they have an advantage if the market is North America and what is the advantage of one over another?