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Manufacturing Costs and Balance of Payments

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1 - JES, Inc., a U.S. technology company has recently developed a revolutionary lighting product that will replace incandescent lamps. The product offers exciting new features along with all of the features of conventional lighting products, but at a fraction of the manufacturing costs. As the international business manager of JES, you have been asked to choose the best mode of entry into the European market. You have the following options:

Export your product from the United States.
Enter into an alliance with a large European company.
Manufacture the product in the United States and set up a wholly owned subsidiary in Europe.
License a European firm to manufacture and market the lighting products in Europe.

In preparation for your choice, list the pros and cons of each method of entry. Which choice do you present to Mr. Salina (CEO and inventor of the new technology)? Be sure to support your decision.

2 - Define a trade deficit and a trade surplus. What are the implications of a long-term trade deficit or trade surplus? What techniques are available to correct balance of payment deficit or surplus?

Does free trade equate to fair trade? Does free trade exist anywhere in the world?

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The response addresses the queries posted in 1393 words.

//Before making the choice to enter the Other Markets, it is necessary for us to understand the advantages and disadvantages of each method of entry. It helps to understand the appropriateness of the entry mode for a particular product. I am providing a brief overview about the pros and cons of four strategies; you are free to add other modes of entry, for your part.//


The new developed revolutionary product of JES, Inc. can be distributed all over the world through various foreign entry modes. The new features incorporated in the strategy will be helpful to generate a significant demand of the products in other countries. The Management of JES, Inc. can use the following entry modes -

- Export the Product - It is the traditional method of entering into a distant market. It may be direct or indirect. It is an important method, as it doesn't require any infrastructure facility in the foreign country. It also avoids the intermediaries, which help to increase the profitability for the organizations. It also helps to enhance the competitive positions in the domestic environment. The organization can sell up to its excessive capacity. But at the same time, it also has some disadvantages such as increase in the promotional cost because of the requirement of new promotional material. The cash flow in the firm also decreases because of the longer time in payment. The company also has to change the packaging to sell its product in foreign country, which increases the cost for the organization (Advantages and Disadvantages of Exporting, 2008).

- Strategic Alliance - In the current international environment, this method of entering in a foreign country is increasing continuously. It is the most cost effective entry mode strategy. It provides the advantage of the large size and the large customer base to the corporation. It also gets the benefit of the expertise in a particular sector or area, in which it makes alliance with another company. The strategic alliance is formed in the same industry or the members of the other industries, which also provides advantage to the organization. On the other hand, the return from the strategic ...

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The response addresses the queries posted in 1393 words.

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Prepare a master budgeting template for sales, production and cash flow


Your task is to make a master budgeting template in a spreadsheet. Obtain the pre-formatted spreadsheet (master.xls). The information necessary for making the master budget is given in Part I of the spreadsheet. You need to enter formulas in Part II.

Once you enter all required formulas, you can use this master budget template for any budgeting situation.


? Enter participants' names and team number in designated cells at the beginning of the spreadsheet.
? In the master budget spreadsheet, you need to complete Part II by entering formulas in relevant colored cells - in all yellow cells like the following

? Make sure you enter right formulas, not numbers. After completion, change some numbers in Part I, and check whether your budgets are changed accordingly.

Do not enter any numbers. Formulas should not contain any numbers. For example, let's assume the following. This is a hypothetical example.

Cell Number Description
A10 $100,000 Amount of Borrowing
B30 0.05 Interest Rate
K1 You need to determine! Amount of Annual Interest Expense

In cell K1, enter the formula only, "+A1*B30" or "=A1*B30").
Do not enter "10000*0.3", "+A1*0.3", or "100000*B30".

? If you just need to copy a number from a particular cell, put the formula "+cell number" or "=cell number".. For example, assume that in cell A50, you have to copy the number in cell B26. Then you have to enter "+B26" or "=B26" in cell A50.

? In Part I, (c), the interpretation is as follows:
To make 1 unit of the product,
 2 lbs of direct materials are needed (1 lbs of the material costs $1.50).
 0.5 hour of direct labor is needed (1 hour of labor costs $6).
 Variable overhead would be applied at $1.40 per direct labor hour. (So, 1 unit of the product includes $1.40* 0.5 = $0.70 for variable overhead)
 Including fixed overhead, unit manufacturing cost is $7.00 (To manufacture 1 unit of the product, it costs $7.00).

? Formulas have to be entered for each month (Jan., Feb., and Mar.) and for the quarter.
-In Sections (3) and (4) of the spreadsheet file, you need to put formulas for April and May too, for some items (Blue areas).
-In Sections (10) and (11) of the spreadsheet file, the formulas for the whole quarter are needed (not for individual months).

? In Section (4) of the spreadsheet, Budgeted variable overhead is:
Budgeted direct labor hours multiplied by Variable overhead rate (POR).

? You need to use some complex logical functions (e.g., If, Greater than, etc. and their combinations) in somewhere in Section (9) of the spreadsheet.

? All numbers are clean (no decimal point) except for Lines 177, 188, and 207. The Cash Budget part of the spreadsheet is formatted to round numbers to the nearest dollar. Off-balance in the budgeted balance sheet implies that something must be wrong.

? For all negative numbers, format them in such a way that the numbers are in parentheses {e.g., instead of "-360" it should be "(360)" }

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