Case 13-33 (Algo) Plant Closing Decision [LO13-1, LO13-2] 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 $20.96 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 $24.26 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 Materials Labor: Direct Supervision Indirect plant Overhead: $ 6,500,000 340,000 1,600,000 1,900,000 $ 7,600,000 8,440,000 Depreciation-equipment Depreciation-building Pension expense Plant manager and staff Corporate expenses* Total budgeted costs 2,200,000 1,800,000 620,000 1,700,000 8,220,000 $ 24,260,000