The company “TTOBA Costa Rica” is a medical device company that is dedicated to the production of various instruments. The star product is the biopsy forceps. Seeking for all areas to speak a single language, they identified the “generic clamp” as an equivalent unit. That is, although all the lines produce different clamps (esophagus, intestinal, pulmonary), for financial and production programming purposes, all are converted to said equivalent unit.

Currently, they have a production plant that consists of 4 production lines, which work from Monday to Saturday, with 8-hour shifts:

• Line 1 works segment A products on a 16-hour daily schedule. They produce 450 thousand generic clamps per month

• Line 2 works on segment B products on a schedule of 8 hours a day. They produce 260 thousand a month

• Line 3 works on segment C products on a 24-hour daily schedule. They produce 700 thousand generic clamps per month

• Line 4 that works the biopsy forceps, currently works 2 shifts, for a total of 16 hrs. They produce 450 generic clamps per month

Each production line requires 5 people per shift. Each operator has a monthly salary of 475,000 colones. Estimate that an additional 5% would cover vacations, overtime and severance pay. Estimate social charges at 56%.

The plant has been growing and they are currently evaluating a new project, the production of a gastric clamp, which is currently produced in Vietnam. This new product would be produced on line 4, and for said new product a monthly volume of 230,000 “generic clamps” is estimated.

The data that the company has are:

• The energy expenditure of the entire plant is 42,000,000 colones per month, and the allocation base used is: production hours

• The engineering and technical support area has an expense of 8,250,000 colones, and its allocation base is the volume in generic clamps

• The maintenance cost is 16,000,000 colones, and is distributed equally for the 4 production lines

• It is believed that with the incorporation of the new SKU, only line 4 would increase its maintenance cost by 12%

• Line 1 and 3 are already depreciated, line 2 had an acquisition value of 110 thousand dollars, depreciation is done on a straight line basis and over 15 years

• Line 4 had an acquisition value of 230 thousand dollars, depreciation is done on a straight line basis and over 15 years.

• The additional annual investment (in assets) to produce the new gastric clamp is 60 thousand dollars, and would be depreciated in a straight line, but over 5 years

• They work 4.33 weeks per month. And in order to produce the new clamp, line 4 must go to 3 shifts

• The exchange rate that is being estimated is 542 colones per dollar

• Material waste is assumed generically between finished product and raw materials as 4%, and applies only to the final finished product.

• For the production of the new SKU, the following materials are required:

Material	Amount	Price
inert plastic	250 gr	$1 for kg
Metal (not titanium)	15 gr	$ 2 for kg
Titanium	5 gr	$ 12 for kg
Packaging plastic	50 gr	$ 0.25 for kg
carton packaging		$ 0.25 for box (1 box per clamp)

• For the production of the new SKU, a new Production Supervisor will be hired, who will be completely dedicated only to that SKU and that new shift. The salary will be 900 thousand colones

General indications

• Only one Excel file must be submitted

• On the first page of the file, the cover must appear, with the names and details of the group members.

• An Excel sheet must be submitted for each cost component of the project:

o Direct variable, indirect variable, direct fixed and indirect fixed

Questions

The total unit cost in Vietnam is $0.96. Is it worth applying the change from Vietnam to Costa Rica?

Now that the price is calculated based on the cost of Vietnam, the final production price is $1.2 per unit. With the Costa Rican price, it is proposed to lower the final production price. What would be the production margin?

Graph the cost structure that the new product would have. Use the following as an example: (group the costs as you think is most convenient to explain the composition)