Question: Acme is setting up a Cost Sharing Contract with one of its major suppliers, HCC Manufacturing. HCC supplies Acme with a laser measuring device that

Acme is setting up a Cost Sharing Contract with

Acme is setting up a Cost Sharing Contract with one of its major suppliers, HCC Manufacturing. HCC supplies Acme with a laser measuring device that Acme then sells to retailers. Acme and HCC are putting in place a Cost-Sharing Contract where Acme agrees to share 15% of HCC's Direct Production Costs (Material, Labor, Automation operation) in return for a 5 % discount on the price for a specified volume. This arrangement will require: HCC to redesign the product so that it can increase margins HCC to comply with International Labor Organizations guidelines on worker compensation and safety Acme to give HCC first right of refusal for any new laser measuring device it may develop Acme to provide detailed sales information to HCC HCC to provide its complete direct production cost information to Acme

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