Question: Considering only production costs (fixed and variable costs) where would you decide to do the bulk of your production? (please show how you got the answer)

A. Product in the US

B. Produce in Brazi

C. Produce in Mexico

D. None of the above

Network Planning: Your new efficient air conditioners have been successful in the North American market and now you want to spread them to South America. Your forecasts predict the following demands: the US market will buy 300,000, a 10% increase from last year. You predict that Mexico will buy 250,000, a 20% increase from last year and in Brazil you are confident you can sell 500,000. You can continue to produce in the plant you purchased in the US or you can sub out manufacturing to sub-contractors in Mexico or Brazil The variable cost to produce parts in each region. US $250.00 Mexico or Brazil $200.00 You are anxious to produce at the lowest cost possible to give you the largest margin. The US plant, which you own, can produce as much or as little as you want. And it has no fixed costs because you already own it. Shipped from Brazil Shipped from US Shipped Mexico from Mexico Brazil Capacity Fixed Costs Fixed Costs 500,000 $2,000,000.00 $3,000,000.00 1,000,000 $3,500,000.00 $5,000,000.00 Variable Transportation Costs to ship an Air Conditioner US $25.00 $50.00 Mexico $20.00 $50.00 Brazil $50.00 $20.00 $20.00 $30.00 $50.00