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Question 233 - CSCP discussion

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A company is considering relocating production to a lower-wage country. Volatility in which of the following areas most likely would impact profitability without modifying product landed costs?

A.
Labor costs
Answers
A.
Labor costs
B.
Currency exchange rates
Answers
B.
Currency exchange rates
C.
Commodity prices
Answers
C.
Commodity prices
D.
Product quality
Answers
D.
Product quality
Suggested answer: B

Explanation:

When a company relocates production to a lower-wage country, fluctuations in currency exchange rates can significantly impact profitability without affecting the product's landed costs. Exchange rate volatility can lead to unexpected increases in costs when converting foreign earnings back to the home currency or when paying for imported materials and services in a foreign currency. This can erode the cost advantages gained from lower wages. In contrast, changes in labor costs, commodity prices, and product quality typically affect the direct costs and product landed costs.

Christopher, M. (2016). Logistics & Supply Chain Management. Pearson.

Chopra, S., & Meindl, P. (2016). Supply Chain Management: Strategy, Planning, and Operation. Pearson.

asked 16/09/2024
Styliani Simoiridou
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