Ole Kirk Kristiansen, founder of the Lego Group in Billund, Denmark, invented the Lego brick, which is made from acrylonitrile butadinese styrene. In 2005, Lego outsourced the production of Duplo bricks to Flextronics, a contract manufacturer with a plant in Hungary. Then, in 2006 Lego sold its Lego brick factory (located in Kladno, Czech Republic) to Flextronics. Lego only retained production of the more complicated Technic and Bionicles products in Billund.
Answer these questions:
1. Wages are higher in Denmark than in Hungary. Compare the equipment and labor costs of producing Duplo bricks in Denmark and Hungary.
2. How did the sale of the Kladno factory affect Lego’s fixed relative to variable costs of producing Lego bricks?
3: How did the sale of Kladno factory affect Lego’s short- and long-run break-even for Lego brick?
