Question

You are a financial consultant for Bordue Steel Co., a Brazilian steel manufacturing with operations in 30 countries around the world. Bordue is about to decide whether or not to expand the operation facility in Monterrey, Mexico in order to supply the growing orders from the US market. The accounting department has provided you the information below (Table 1). You also know that this facility would reduce total revenue of $2.5 million from an old facility located in Reynosa, Mexico. In addition, the larger facility might require $900,000 on private security services due to the recent increase in violence and burglary cases in the bordering states between the US and Mexico. Should you recommend to open the new operation facility in Monterrey, Mexico? Provide evidence supporting your decision. 6. Table 1 Pre-facility Expansion Post-facility Expansion Revenues &Costs Revenues and Costs (Monterrey)(Monterrey) Total Revenues $29,745,243 $42,325,700 Variable Cost $23,647,697 S30,060,022 Machines Trucks Labor Energy Maintenance $11,333,780 $ 8,002,506 s 3,205,476 $ 758,045 s 347,890 $14,586,500 $ 9,976,456 S 4,100,201 S 893,560 S 503,305 Direct Fixed Cost $2,390,704 S3,690,389 $ 145,000 Design/Construction S 2,245,704 145,000 S 3,545,389 Depreciation Indirect Fixed Cost $797,325 $797,325 Managerial Office supplies Other costs Wages & Benefits S 603,205 s 103,470 S 90,650 S 603,205 S 103,470 S 90,650

Answer 1