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Agrestal Cosmetics, Inc

question 91

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Agrestal Cosmetics, Inc. is a leading U.S. manufacturer of natural, herb-based cosmetic products. It started out purely as a domestic company but in 1983 established operations in India primarily to gain access to that country's abundant supply of hibiscus, a plant that provided important raw materials to the company's products. In 2009, Agrestal did business in 29 countries around the world. It has factories in Malaysia and Taiwan to use the low labor cost in those countries in making its labor-intensive products. In the late 1990s, it had to close it operations in a foreign country when, due to a change in the country's leadership, all foreign companies had to cease doing business there. During the Brazilian financial crisis, Agrestal adopted the practice of using revenues generated in Brazil to buy orange concentrate locally and sell that concentrate in the United States. Agrestal's corporate finance department aggressively uses hedging in all the countries where it operates. In a few select countries, Agrestal licenses its brand names and know-how to local licensees. Currently, Agrestal is organized whereby all strategic and operational decisions are made at its Princeton, New Jersey headquarters.
-An important economy of scope for Agrestal in pursuing international opportunities is

Definitions:

Variable Costs

Costs that vary directly with the level of production or output.

Absorption Costing

An accounting method that includes all manufacturing costs—direct materials, labor, and both variable and fixed overhead—as part of the cost of a finished product.

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overheads - in the cost of a product.

Variable Costing Income (VCI)

An accounting method that includes only variable costs—costs that change with production level—in calculating net income.