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Finance & Accounting
Pages 4 (1004 words)
FIFO & LIFO Inventory Valuation Methods Merrimack Tractors & Mowers, Inc. Case Study Customer Name Course Name Instructor Name University Date of Submission Issues the CEO is facing The issues which the CEO or the President of Merrimack Tractors and Mowers, Inc., Rick Martino, is facing and concerned with includes most prominently the projected decline in the bottom-line or net income of the company in the year 2008 which is lesser than 2007 and earlier years.
The ever strengthening value of the Chinese currency which is denominated in Yuan or Renminbi against the US Dollar became another adverse factor for the company as this compounded and further elevated the increase in costs incurred by Merrimack. The flexibility in the exchange rate by Chinese authorities against US Dollar decreased from a CNY: USD ratio of 8.3:1 until mid-2005 to below 7.0:1 by early 2008. Oil prices increase further deteriorated the situation for Merrimack as this elevated shipping costs of transporting finished mowers to the United States by almost 200% with the cost of shipping a 40-foot container from Shanghai to US rising from $3,000 in 2000 to almost $9,000 by 2008. The above critical factors changed the advantage of outsourcing for Merrimack into a soul disadvantage as these cost increments did not affect Merrimack’s competitors such as The Toro Company who has its material manufacturing setup in the United States. ...
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