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Sound-Around Turntables (SAT) is a regional manufacturer of high fidelity turntables. It has been in business in Detroit, Michigan since 2008 and has steadily increased sales volume as U.S. sales of vinyl albums re-ignited.

Robert Ritchie, CEO for SAT received an order for 2,500 turntables for Best Buy, a national electronics retailer. Production for this order will begin in late March and the customer order must be delivered on June 1. Since SAT builds to order, Ritchie needs to begin ordering parts from his global supply base soon.

An important needed component is the turntable motor that is normally purchased from Dongguan Electric. The supplier is located in Kaohsiung City, Taiwan. The product is high quality and SAT has worked with Dongguan for 7 years. All units in the order would be shipped at one time. However, the company recently raised its prices citing higher material costs due to rising tariffs.

Last week, Ritchie received a proposal from an Argentinian company that wants to become a supplier to SAT. Maduro Motors promises to make monthly deliveries of 500 units starting on December 15. Ritchie likes the idea of reducing the supplier-to-factory distance and receiving monthly deliveries. However, Ritchie doesnt know much about this supplier or the political environment in Argentina.

The Options

Dongguan Electric currently sells the 20W synchronous motor to SAT for 825 TWD per unit. Order cycle time is 46 days. Terms are listed as DAT, Chicago Tradeport.

Maduro Motor proposes to sell a similar 20W electric motor to SAT for 875 ARS per unit. Order cycle time is 18 days. Terms are listed as FAS, Port of Mar del Plata.

	Dongguan	Maduro
Price Per Unit	825 TWD	875 ARS
Estimated Ocean Shipping Cost per unit	140 TWD	78 ARS
Estimated US Customs duty per unit	39 TWD	12 ARS

Exchange Rates

Date	Taiwan New Dollar (TWD)	Argentine Peso (ARS)
January 11, 201x	30.75	29.88

Answer the following questions:

1. Evaluate the selling price and related costs per unit offered by each supplier in US dollars.

	Dongguan	Maduro
Price Per Unit	$	$
Estimated Ocean Shipping Cost per unit	$	$
Estimated US Customs duty per unit	$	$

2 a. What costs, responsibilities and risks are assumed by the buyer (SAT) and the seller (Dongguan Electric) under Incoterms 2010, DAT, Chicago Tradeport?

b. What costs, responsibilities and risks are assumed by the buyer (SAT) and the seller (Maduro Motor) under Incoterms 2010, FAS, Port of Mar del Plata?

	DAT, Chicago Tradeport	FAS, Port of Mar del Plata
Packaging goods for export and loading the container
Factory to port transportation
Payment of export duties (if any are due)
Loading the container on the ship
Paying for the ocean transport (carriage charges)
Paying for the insurance on the international voyage
Paying destination terminal charges for unloading freight
Clearing US Customs (pay import duties & taxes)
US transportation to final destination

3. Given your responses to Questions 1 and 2, what is the total known cost per motor that SAT will incur and what other costs will SAT incur?

	Dongguan	Maduro
Costs from Q1 paid by SAT	$	$
Costs from Q2 that SAT will incur
Which supplier do you believe will provide the lowest total cost per unit?	Dongguan	Maduro

4. What other costs and factors would you consider during the supplier selection process?

5. Which global supplier would you select? Why?

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