Cuddly Critters, Inc., manufactures plush toys in a facility in Queensland, Brisbane. Recently, the company designed a group of collectible resin figurines to go with the plush toy line. Management is trying to decide whether to manufacture the figurines themselves in existing space in the Queensland facility or to accept an offer from a manufacturing company in Indonesia. Data concerning the decision are:

Required

1. Should Cuddly Critters manufacture the 400,000 figurines in the Queensland facility or purchase them from the Indonesian supplier? Explain.
2. Cuddly Critters believes that the dollar may weaken in the coming months against the Indonesian rupiah and does not want to face any currency risk. Assume that Cuddly Critters can enter into a forward contract today to purchase 27,300 IDRs for $3.40. Should Cuddly Critters manufacture the 400,000 figurines in the Queensland facility or purchase them from the Indonesian supplier? Explain.
3. What are some of the qualitative factors that Cuddly Critters should consider when deciding whether to outsource the figurine manufacturing to Indonesia?

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Expected annual sales of figurines (in units) Average selling price of a figurine Price quoted by Indonesian company, in Indonesian Rupiah (IDR), for each figurine Current exchange rate Variable manufacturing costs Incremental annual fixed manufacturing costs associated with the new product line Variable selling and distribution costs Annual fixed selling and distribution costs 400,000 $5 27,300 IDR 9,100 IDR = $1 $2.85 per unit $200,000 $0.50 per unit $285,000 Selling and distribution costs are the same regardless of whether the figurines are manufactured in Cleveland or imported.