Paper 12 Case Study - Chapter 8 Decision Making Case-YuYuan.doc

Yuyuan Garment Co. Ltd Yuyuan Garment Co. Ltd is located in Suzhou, Jiangsu Province. Yuyuan Garments, Thailand oriented company, entered China since 1994. Yuyuan emphasizes quality and productivity by applying imported auto thread trimming sewing machines. The main product is children’s wear which exports to US and Canada markets. The production capacity is 240,000 pcs per month with prompt deliveries. Now Yuyuan, has been asked to provide a fixed price quotation for a batch of children’s wear required by Carrefour, a famous Multinational merchandise Company from Shanghai. Yuyuan’s accountant has compiled the following figures, together with some notes as basis for a quotation. Direct materials Cloth 200,000 at ￥ 100 per thousand inches 20,000 note 1 200,000 at ￥120 per thousand inches 24,000 note 1 Other materials 5,000 note 2 Labor Skilled 3,200 hours at ￥12 per hour 38,400 note 3 Unskilled 2,000 hours at ￥6 per hour 12,000 note 4 Other cost Hire specific Mitsubishi Heavy Keyhole Machine 3,500 note 5 Depreciation of general purpose machine 2,000 note 6 General overheads 5,200 hours at ￥1 per hour 5,200 Plans 2,000 note 8 Total cost 112,100 Profit 22,420 note 9 Suggested price 134,520 Notes The contract requires 400,000 inches cloth, 200,000 inches are already in inventory and 200,000 will have to be bought in. This is a standard type of cloth regularly used by Yuyuan. The 200,000 in inventory were purchased earlier in the year at ?00 per 1,000 inches. 0The current replacement cost of this type of cloth is ?120 per 1,000 inches. If the cloth in inventory are not used on this job, Yuyuan is