Answer the following question.
- Use the data in the case study to calculate the three-year cost for each of the options. (30 marks)
| Country | Efficiency (units / worker / hour) | Average Hourly Wage | Unit Shipping Cost to Asia | Unit Shipping Cost to US and Other | Investment cost in $US million | Capacity (million units) | Manufacturing Cost / Unit | Total Unit Cost to Asia | Total Unit Cost to US and Other | 3-year cost |
| Israel | 10 | 10.78 | 1 | 0.75 | 0 | 6 | ||||
| Israel expansion | 10 | 10.78 | 1 | 0.75 | 2 | 2.5 | ||||
| Jordan | 8 | 1.05 | 1 | 0.75 | 4.5 | 3.5 | ||||
| Singapore | 8 | 9.19 | 0.5 | 1.5 | 6 | 3 | ||||
| China | 7 | 0.50 | 0.5 | 1.5 | 6.5 | 4 |
Assumptions:
- The demand of 8-million applies to each of the next three years.
- K&S will produce to meet demand.
- Capacity will be greater than 8 million. So K&S will have to decide where to meet that demand from.
- 83% of demand is in Asia and 17% from the rest of the world (relevant because of differences in shipping costs)
- For Singapore, Jordan and China, it makes sense to utilize their full capacity (because of lower unit cost to Asia) and supply the balance from Israel.
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