Question

Plant Closing Decision QualSupport Corporation manufactures seats for automobiles, vans, trucki, and various recreational veluicles, The company has a mamber of plants around the work, including the Denver Cover Plant, which makes seat covers. Ted Vosilo is the plant manager of the Denver Cover Plant but also serves as the regional production manager for the conpany. His bedget as the regional manager is charged to the Denver Cover Plant. Vosilo has just heard that QualSupport has received a bid from an outside vendor to supply the equivalent of the entire annual output of the Denver Cover Plant for $20.64 million. Vosilo was astonished at the low outside bid because the budget for the Denver Cover Plant's operating cosis for the upcoming year was set at $23.94 million. If this bid is accepted, the Denver Cover Plant will be closed down. The budget for Denver Cover's operating costs for the coming year is presented below. "Fixed corporate expenses allocaled to plants and other operating units based on total budgeted wage and salary costs. Additional facts regarding the plant's operations are as follows: 3. Due to Denver Covor's commitment to use high-quality fabrics in all of its products, the Purchasing Department was instructed to place blanket purchase orders with major suppliers to ensure the receipt of sufficient rinaterials for the coming year. If these orders are canceled as a consequence of the plant elosing, tennination charges world amount to 25% of the cost of direct materials. b. Approximately 380 plant employees will lose their jobs if the plant is closed. This inveludes all of the direct laborers and supervisors as well as the plumbers, electricians, and other skililed workeni classified as indirect plant workers. Some would be able to find new jobs while many others would have difficulty. All employees would have difioulty matehing Denver Cover's base pay of S13:20 per hour, whieh is the highest in the area. A clause in Denver Cover's contriet with. the union may lolp some enployees; the company must provide employment assistance to its former cmployees for 12 months after a plant closing. The estimated cost to alminister this service would bo $0.8 million for the year. d. Vosilo and his staff would not be affected by the closing of Denver Cover. They would still be responsible for administering three other area plants. e. If the Denver Cover Plant were closed, the company would realize about $1.75 million salvage value for the equipment and building. If the plant remains open, there are no plans to make any significant investments in new equipment or buildings. The old equipment is adequate and should last indefinitely. Required: 1. Without considering costs, identify the advantages to QualSupport Corporation of continuing to obtain covers from its own Denver Cover Plant. 2. QualSupport Comoration plans to prepare a financial analysis that will be used in deciding whether or not to close the Denver Cover Plant. Management has asked you to identify: a. The annual budgeted costs that are relevant to the decision regarding closing the plant. (show the dollar amounts) b. The annual budgeted costs that are irrelevant to the decision regarding closing the plant and explain why they are irrolevant. (show the dollar amounts) c. Any nonrecurring costs that would arise due to the closing of the plant, and explain how they would affect the decision. (show the dollar amounts) 3. Looking at the data you have prepared in (2) above, a. Calculate the financial advantage (disadvantago) of closing the plant. b. Should the plant be closed? 4. Identify any rovenues or costs not speeifically mentioned in the problem that QualS upport should consider before

Answer 1

QualSupport Corporation should compare relevant costs, irrelevant costs, and nonrecurring costs to decide on closing the Denver Cover Plant, considering its advantages like quality control against the financial savings from an outside vendor's bid.

Step-by-step explanation:

When assessing whether to close the Denver Cover Plant and accept the outside vendor's bid, QualSupport Corporation should consider various factors. For advantages of keeping the plant operational, QualSupport benefits from control over quality and the ability to respond quickly to changes in demand or product specifications. Financially, the relevant costs to consider for closure are those that will change as a result of the decision, such as direct labor, materials, and variable overheads. Irrelevant costs include sunk costs and fixed costs that will not change with the closure. Nonrecurring costs like termination charges for canceled material orders should also be evaluated. In a financial comparison, QualSupport should weigh the annual operating costs against the outside bid, factoring in salvage value from plant closure and any nonrecurring costs.

Applying this to the provided figures, if the plant's operating costs amount to $23.94 million versus the $20.64 million outside bid, plus considering the salvage value and nonrecurring costs, QualSupport should calculate the net financial advantage or disadvantage. If the costs of staying open are higher, closing the plant might be the preferred option, unless strategic or other qualitative factors suggest otherwise.

Answer 2

Certainly, here's a more detailed breakdown:

Final Answer:

1. The accurate statements about the current status of the team are:

The team is realizing positive synergies, indicating effective collaboration.

The team's shared goal is allowing team members to realize their collective performance.

Accountability is unclear due to the absence of a clear and measurable goal.

2. For the decision point of adding people from other departments to the team, the recommended option is:

Two additional members should be included: one from new product development to assess feasibility for the Millennial market and one from finance to evaluate revenue and profitability.

3. Regarding reviewing the new team leader's plan and existing team members, the advice is:

Retain existing team members as they fulfill distinct roles and consider enrolling Jaime in team skills training for enhanced effectiveness.

4. In response to conflicts arising within the team, the recommended action is:

Identify conflict nature (relationship or task-oriented) and assess their impact; take action or allow conflicts to continue based on their detriment to team progress.

5. For finding the team's common purpose, the suggested approach is:

Schedule an offsite retreat to collaboratively establish a common purpose and encourage team bonding.

Step-by-step explanation:

The positive synergies and a shared goal imply productive teamwork, though unclear accountability calls for role clarification. The recommended addition of diverse expertise acknowledges the necessity of multidimensional perspectives in addressing market challenges.

Retaining existing members recognizes their unique contributions while investing in skill enhancement for greater team efficiency. Dealing with conflicts entails a strategic approach—identifying the nature and impact before taking appropriate action.

An offsite retreat is suggested to organically foster a shared purpose, emphasizing teamwork and mutual understanding, thus solidifying the team's foundation for future success.