Allocating Production Resources at American Company
#1) An American Company that sells consumer electronics
products has manufacturing facilities in Mexico, Taiwan, and Canada. The
average hourly wage, output, and annual overhead cost for each site are as
follows:
Mexico Taiwan Canada
Hourly wage rate $1.50 $3.00 $6.00
Output per person 10 18 20
Fixed overhead cost $150,000 $90,000 $110,000
a. Given these figures, is the firm currently allocating its
production resources optimally? If not, what should it do? (Consider output per
person as a proxy for marginal product). Suppose the firm wants to consolidate
all its manufacturing into one facility. Where should it locate? Explain.
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