DATE: 04/28/2012
TO: Dr. Gordon, Gus.
FROM: Angelica Mendiola, Brittany Shepherd, Kiana Willis, and Terri Smith
SUBJECT: SEWMEX: Short-Term Profit Planning in an International Setting

SEWMEX is a newly formed sewing factory located in Mexico. SEWMEX, owned by an American company, is incorporated in Mexico as a Mexican company. By contract, the American parent company, SEW Inc. purchases all of SEWMEX’s output. SEW provides all raw materials to SEWMEX. The president of SEW is having suspicions that there are costing issues creating cost distortions across the SEWMEX’s four product lines: pants, shirts, outerwear and other products.

The controller of SEW recently resigned unexpectedly after a disagreement with the president of the …show more content…

Assuming labor costs per hour and in total are held constant, what would cause plant efficiency at SEWMEX to change? That is, from the table you prepared in response to part (c) above, what inferences can you draw concerning efficiency changes for SEWMEX?

Since efficiency is determined by the relationship of activity of inputs to activity outputs, costs and trends become important measures of efficiency. For the case in SEWMEX, labor costs per hour and in total are held constant. Assuming that labor costs and hours remain the same, the