Qual Support Corporation Manufacture - Case Study - Management Assignment Help

Assignment Task:

Task:

Q # 1 (Chapter 11)

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 $35 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 $52 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.

Additional facts regarding the plant’s operations are as follows:
1. Due to Denver Cover’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 materials for the coming year. If these orders are canceled as a consequence of the plant closing, termination charges would amount to 20% of the cost of direct materials.

2. Approximately 400 plant employees will lose their jobs if the plant is closed. This includes all of the direct laborers and supervisors as well as the plumbers, electricians,and other skilled workers classified as indirect plant workers. Some would be able to find new jobs while many others would have difficulty. All employees would have difficulty matching Denver Cover’s base pay of $18.80 per hour, which is the highest in the area. A clause in Denver Cover’s contract with the union may help some employees; the company must provide employment assistance to its former employees for 12 months after a plant closing. The estimated cost to administer this service would be $1.5 million for the year.
3. Some employees would probably choose early retirement because QualSupport has an excellent pension plan. In fact, $3 million of the annual pension expense would continue whether Denver Cover is open or not.
4. 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.
5. If the Denver Cover Plant were closed, the company would realize about $3.2 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. Identify the advantages to QualSupport Corporation of continuing to obtain covers from its own Denver Cover Plant.
2. QualSupport Corporation 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:
i. The annual budgeted costs that are relevant to the decision regarding closing the plant and explain why they are relevant
ii. The annual budgeted costs that are irrelevant to the decision regarding closing the plant and explain why they are irrelevant
iii. Any nonrecurring costs that would arise due to the closing of the plant, and explain how they would affect the decision.
3. What is the financial advantage (disadvantage) of closing the plant? Explain your answer.
4. Identify any revenues or costs not specifically mentioned in the problem that QualSupportshould consider before making a decision.

Q # 2 (Chapter 11 & 12)

Haley Romeros had just been appointed vice president of the Rocky Mountain Region of the Bank Services Corporation (BSC). The company provides check processing services for small banks. The banks send checks presented for deposit or payment to BSC, which records the data on each check in a computerized database. BSC then sends the data electronically to the nearest Federal Reserve Bank check-clearing center where the appropriate transfers of funds are made between banks. The Rocky Mountain Region has three check processing centers, which are located in Billings, Montana; Great Falls, Montana; and Clayton, Idaho. Prior to her promotion to vice president, Ms. Romeros had been the manager of a check processing center in New Jersey. Immediately after assuming her new position, Ms. Romeros requested a complete financial report for the just-ended fiscal year from the region’s controller, John Littlebear. Ms. Romeros specified that the financial report should follow the standardized format required by corporate eadquarters for all regional performance reports. That report follows:

Q # 3 (Chapter 14)

An electronics manufacturer is trying to encourage its engineers to design simpler yet innovative products so that overall costs are reduced.
Required:
How the value-chain function costs (R&D, design, production, marketing, distribution, customer service) would be affected in product redesigning for adding simplicity and innovation. Explain how this decision will affect cost allocation, customer profitability, sales variance and market variance analysis.

Q # 4 (Chapter 16)

The Scottie Sweater Company produces sweaters under the “Scottie” label. The company buys raw wool and processes it into wool yarn from which the sweaters are woven. One spindle of wool yarn is required to produce one sweater.

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