The Decision to Establish Foreign Manufacturing Operations Through Direct Investment

question 12

Multiple Choice

The decision to establish foreign manufacturing operations through direct investment or licensing depends on

• A) the extent to which capital is used in the production process
• B) the size of the foreign market
• C) the amount of fixed cost a firm must bear when establishing an overseas facility
• D) all of the above

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Definitions:

Gross Profit

Income from sales or services minus the cost of goods sold; it measures how efficiently a company uses labor and supplies in production.

Cost Of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including materials and labor, used to determine gross profit.

Operating Expenses

Expenses incurred in the normal operation of a business, including costs such as rent, utilities, and payroll, that do not directly relate to the production of goods or services.

Profit Center

A profit center is a branch or division of a company that is directly responsible for generating its own revenue and profit.