Question

there is missing or wrong part. can you solve this question again as soon as possible please? and please send your solutions.

QualSupport Corporation manufactures seats for automobiles, vans, trucks, and various recreational vehicles. The company has a number of plants around the world, 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 company. His budget 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 $20.28 million. Vosilo was astonished at the low outside bid because the budget for the Denver Cover Plant's operating costs for the upcoming year was set at $23.58 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. Denver Cover Plant Annual Budget for Operating Costs $ 7,800,000 Materials Labor: Direct Supervision Indirect plant Overhead: Depreciation-equipment Depreciation-building Pension expense Plant manager and staff Corporate expenses Total budgeted costs $6,300,000 390,000 1,900,000 8,590,000 1,400,000 1,500,000 1,800,000 590,000 1,900,000 7,190,000 $23,580,000 Fixed corporate expenses allocated to plants and other operating units based on total budgeted wage and salary costs

Answer 1

Ans-2-a- The following costs can be avoided by closing the plant and therefore are relevant to the decision:-

Materials		$7,800,000
Labor:-
Direct	$6,300,000
Supervision	$390,000
Indirect plant	$1,900,000	S 8,590,000
Differential pension cost
($1,800,000-$720,000)		$1,080,000
Total annual relevant costs		$17,470,000

Ans-2-b- The following cost can't be avoided by closing the plant and therefore are not relevant to the decision:-

Depreciation- Equipment	$1,400,000
Depreciation- Building	$1,500,000
Continuing pension cost ($1,800,000-$1,080,000)	$720,000
Plant manager and staff	$590,000
Corporate expenses	$1,900,000
Total annual continuing cost	$6,110,000

Ans-2-c- The following nonrecurring costs would arise in the year that the plant is closed, but would not be incurred in any other year:-

Termination charges on canceled materials orders
($7,800,000*25%)	$1,950,000
Employment assistance	$880,000
Total recurring cost	$2,830,000

These two costs are relevant to the decision because they will be incurred only if the plant is closed.

Ans-3-a-

	First Year	Other Year
Cost of purchasing the covers outside	$(20,280,000)	$(20,280,000)
Costs avoided by closing the plant (Part 2a)	$17,470,000	$17,470,000
Cost of closing the plant (first year only)	$(2,830,000)
Salvage value of equipment and building	$1,950,000
Net advantage (disadvantage) of closing the plant	($3,690,000)	($2,810,000)

Ans--3-b- No,The plant should not be closed.

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