Question
Global cost-benefit analysis (5 Marks) Due to rising labor costs in China, Superior Garment, based in Singapore, is considering shifting part of its production facilities
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Global cost-benefit analysis (5 Marks)
Due to rising labor costs in China, Superior Garment, based in Singapore, is considering shifting part of its production facilities from China to an emerging market, Vietnam, to better integrate its supply chain in the Southeast Asia region.
Jason Chua, the CFO of the company, estimates that Superior Garment needs to invest $735,000 to acquire an existing factory in Vietnam and another $285,000 in renovations and installation of new machineries. The cost of training new workers is estimated to be $310,000. Andrew believes that the new factory will lead to an estimated $928,000 savings in labor costs and another $417,000 savings in logistics expenses.
Requirement
Use cost-benefit analysis to recommend whether Fortune Garment should shift part of its production facilities from China to Vietnam. Explain your answer.
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Financial Accounting
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
7th Edition
978-0470477151, 978-0-470-5562, 470556242, 0-470-55624-2, 9780470556245, 978-0470507018
